You would have come across this statistic – 1 in 2 companies shut shop before the 5-year-mark, and just 1 in 3 companies celebrate their tenth anniversary.
If you are a new entrepreneur looking to launch your startup or a small business owner who’s recently started an organization, the odds are stacked against you. But, don’t let these stats scare you from following your passion and pursuing your dreams. The best thing a business owner can do is – learn from the mistakes of others.
Here, in this guide, we offer you the top reasons why businesses fail, and what you need to do to avoid these mistakes early on, as your business grows and evolves.
#1: Lack of Managerial Experience
Why most businesses fail is not because of a lack of passion, but a lack of managerial experience.
Most business owners or entrepreneurs do not have relevant experience in key business management areas, including finance, production, hiring, marketing, etc. They try to do it all at once and end up making fatal mistakes that prove costly.
How to overcome it? As a business owner, you need to master the art of delegation. You have to remind yourself that you cannot manage it all on your own. Hire skilled employees and outsource managerial tasks to competent professionals.
A successful business owner is a good leader who fosters a climate of productivity at work. He/she is skilled at hiring competent people, offers them the right training, and delegates tasks accordingly.
#2: Lack of Coordination Among Team Members
A closely-knit team that works in synchronization is a huge asset for a business.
As your business grows, allocating tasks manually to all team members is not only time-consuming but also could lead to conflicts among team members. When your employees begin to feel that they are overworked or under-worked, they begin to lose interest in the job at hand.
Besides conflicts, lack of resource planning leads to other problems like delayed projects, inefficient utilization of resources in hand, wrong hiring, lost revenues, missed client deadlines, and more.
How to overcome it? Invest in a resource planning tool like the eResource Scheduler, Hub Planner and more. It’s multi-user, feature-rich cloud-based software that helps you allocate the right tasks to the right team members. It allows project managers, resource coordinators, and team members to remain on the same page, offering optimum resource utilization.
Real-time resource tracking, drag-n-drop resource allocation charts, project timings, resource requirements, working calendars, and other features – offer transparency at all levels, avoiding conflicts among team members. With the eResource Scheduler, your team functions cohesively, without any internal disputes.
The tool also helps team managers plan resources ahead of time and make the right hires who are the right cultural fit for your organization.
#3: Lack of Working Capital
Cashflow is the beating heart of any organization.
Irrespective of how passionate you are, if the business doesn’t have the required working capital, then all plans come to a standstill. Some business owners get so engrossed in other tasks that they fail to take the right measures on time to avoid cash flow problems.
How to overcome it? Irrespective of the size and nature of your business, you need to hire an accountant to keep track of all receivables, revenues, and expenditures. If hiring an accountant is not possible, then you need to learn the basics of business accounting and monitor your finances regularly.
If required, you can also opt for external funding like working capital loans, short-term business loans, invoice discounting, or merchant cash advances to boost cash flow.
#4: Lack of Online Presence
In today’s digital age, irrespective of the nature and size of your business, it’s imperative that you build a robust online presence – this includes a website and social media presence, at the very least.
Build a professional website for your business that makes it easy for customers to find your business, research your products and services.
How to overcome it? Start by claiming your free “Google My Business” page. The GMB page is an excellent benefit for local businesses as your business listing – name, address, and phone number – pop up in local searches, connecting you with local customers.
Besides a responsive, mobile-friendly website, you need to work on building the social media profiles of your business so that customers can connect with your products/services.
#5: Lack of Connectivity with Customer Needs
In this era of hyper-competitiveness, the customer is always right is more valid than ever before.
Today’s customers are highly demanding, and failure to meet their expectations results in loss of brand loyalty. To give an example, customers today expect even small mom-and-pop establishments to offer a variety of payment methods like Google Pay, Apple Pay, and PoS machines.
If you don’t meet customer expectations, then you can be sure that they’ll switch immediately to your direct competitors, who offer then better service.
How to overcome it? Not sure how to monitor customer feedback? Start by listening to customer mentions of your brand on social media, and other review platforms like Google Reviews, Yelp reviews, and more.
Work on providing your customers with the best experience, every single time. Though challenging to pull it off, the results of improving customer service are so worth it.
#6: Lack of Control Over Growth
While this may feel counterintuitive, remember that in business, “slow and steady wins the race.”
The keyword here is steady. Expanding too quickly strains organizations at several levels – cash crunch, making the wrong hires to fulfill immediate requirements, and so on.
How to overcome it? Always remember not to compromise on quality for quantity. Taking more business that your team can handle not only drains your working capital but could also end up burning out your star employees. Instead of choosing every offer that comes your way, be smart about the clients you pick and the revenues you generate from each client.
#7: Lack of Work-Life Balance
All work and no play, makes your team lose out on productivity.
Running a business is extremely hard. It’s a never-ending job that has no off-times. Even the most passionate employees burn out in the process. To ensure the success of your organization, you need to ensure that all your employees enjoy a healthy work-life balance.
How to overcome it? Provide adequate leaves, vacations, and other team outings for your employees to relax and re-energize.
Make New Mistakes; Don’t Repeat the Old Ones
Starting a business is a huge risk – you have to work on evolving your product to meet changing customer demands, improve your services to offer customers seamless customer experience, tackle the financials, and more. There’s plenty of uncertainty ahead.
While businesses can’t have a smooth run always, especially in the initial years, as a business owner, you can avoid repeating these mistakes by taking timely efforts.
Have you come across any other reasons for businesses to fail? Let us know in the comments.