Why Do Businesses Fail?
20% of new businesses fail within a year – what is hindering them?
You may be wondering, what are your chances if you’re starting a business now? How many companies fail either in the short-term or the long run. You may have heard that 1 in 10 businesses succeed. The situation is not so dire, but this statement is not so far off.
Statistically, about 10-20% of small businesses fail in their first year, and a staggering 70% of enterprises will fail over 10 years (this number goes up to 95% in the last couple of years due to COVID-19). The rest of the business does not necessarily succeed, but we know they survived
Business world is risky!
Venturing into the business world as an owner or entrepreneur is not for the faint of heart. Every business venture is inherently risky. One of the main skills every business owner needs to learn, and fast, is risk identification and management. They must mitigate company-specific risks while simultaneously bringing a product or service to market at a price point that meets consumer demand levels.
It is necessary to understand what can lead to it and how it can be managed or avoided to reduce the potential of failure. The most common reasons small businesses fail include inadequate marketing research, lack of business planning, lack of finances, and lack of flexibility.
Lack of market research. For the success of an entrepreneurial venture, it is crucial to find a chance or unmet need and offer a solution. It is essential to understand your customers, their behavior, habits, and patterns. Without market research, beginners become flies in the fight against the titans, and only by sheer luck can they survive.
Poor business planning. Without planning and analysis, the business does not have clear goals and action plans based on which it can evaluate its success or correct problems. Every business needs a business plan, and it does not matter in which stage of development.
A well-developed business plan is the foundation of any successful venture. Through a business plan, you will describe achievable goals for your business, how your business can meet those goals, and possible problems and solutions. The plan should provide you with information about the need for your business through research and surveys, about the costs and inputs needed for the venture, strategies, and timelines that should be implemented and met.
Once you have the plan, you must stick to it. Follow it unless you have found that your business plan is overwhelmingly inaccurate. If you spend more or change your strategies, you ask for failure.
Lack of finances. This problem very often occurs as a consequence of poor financial planning. The other part of this problem is the inability to access funds. No one will give money unless there is a clear plan for how that money will be earned and returned.
Every entrepreneur is faced with unforeseen problems and unanticipated expenses. Each owner should keep the amount of accessible money varies from business to business, but 20 percent of a budget is a widely accepted minimum starting point.
Lack of flexibility. Once the business is established, all plans are laid out, and you have gained a customer base, you must not become complacent. Every business must be prepared for changes and adaptations. Innovations are being introduced faster and faster, and problems can arise at every step, so entrepreneurs and managers must be ready for change. Monitor the market and know when you may need to alter your business plan. Being on top of critical trends will allow you lots of time to adjust your strategy so that you can remain successful.
Failing to Prepare is Preparing to Fail!
When you decide to dive into the business waters, forget statistics. Once you start, focus on your plan, execute it to perfection and manage risks and problems along the way, and you just might become a unicorn.
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