Why do businesses fail in today’s world? That is a billion-dollar question that every business owner wants the answer to as soon as possible. Tons of statistics are available these days that show the survival rate of small businesses these days. For instance, according to Fundera, only twenty percent of new small businesses survive past the one-year mark. In comparison, fifty percent of these small businesses don’t even make it to their fifth year. Whether you’re an entrepreneur who is just starting or a seasoned business owner, these statistics might scare you.
While these numbers might be accurate to some extent, you shouldn’t let them demotivate you and kill your spirit. Instead, it would be best to find and understand the reasons behind why these startup businesses fail. After all, there might be several underlying factors behind your failure. Therefore, if you can identify other businesses’ mistakes, you can take the steps necessary to avoid following in their footsteps.
Let us see the reasons behind business failure in today’s world.
Failing to acquire ample business knowledge
When you devised your business idea, you already had tons of information, skills, passion, zeal, and knowledge to turn that idea into a reality. All of these things paid off in the long haul, which is why your business is doing great right now. However, while you were busy ensuring the ship stays afloat, you probably forgot to study current industry trends and update your skillset. It is the reason why your business failed without having its first anniversary.
If you don’t keep acquiring the latest business knowledge, your business won’t survive in the long run. Therefore, it’s only a matter of time that you are swept away by a more efficient and well-informed competitor. That said, to have a competitive advantage, consider keeping your business and market knowledge up-to-date. And what could be a better option for this than opting for eLearning? You can enroll in an AACSB online MBA no GMAT required to learn the ropes of running a business in today’s era. Doing so will ensure you acquire the knowledge necessary to boost your business and stay three steps ahead of your competition.
Poor planning or no business plan
A business idea that you think is worth millions inside your head might not be worth anything in the real world. It is especially the case for small business owners. However, it doesn’t mean that you ignore your passion. Instead, it means you need to do a little business planning and some much-needed research. A business plan will allow you to define your business idea’s UVP (unique value proposition), the difference between you and your competition.
Moreover, a good business plan must contain your business’s long-term and short-term goals and ways to measure its progress. However, there are other essential factors you should add to your business plan. These include; cash flow projections, target customer base, an executive summary, sales, marketing strategy, financial plan, etc. Failure to develop a business plan means you’ll be driving to an unknown location without a road map, and you’ll indeed get lost. And in your case, your business will close down prematurely.
Mismanagement of inventory
Your business will never be successful if you don’t know how to manage inventory properly. In fact, according to the SBA, inventory mismanagement is one of the top reasons why businesses fail these days. In addition, poor inventory management will ultimately lead to inventory overages and shortages.
For example, suppose you are a merchant. In that case, you might put yourself at an immense risk when purchasing large amounts of inventory to sell for a profit. However, suppose you cannot sell your stock according to your demand forecasts. Your products will lose value in that case, and your business will have to close down before it even turns profitable. To remedy this issue, you can take advantage of inventory management tools and software to ensure you keep track of all your inventory and avoid overages and shortages.
Failing to understand today’s customer’s behavior
Technology is a necessity in today’s day and age. Besides, the saying “the customer is always right” is more accurate than ever. For instance, today’s customers expect small businesses to have alternative payment methods. These include payment via credit and debit cards or digital currencies like Google or Apple Pay- Not to mention the increased demand for high-quality customer care.
Nowadays, we live in a socially obsessed world where it’s far easier for consumers to share their opinions and thoughts about their interactions with different businesses. Therefore, if you don’t deliver on their demands, your customers will surely leave bad reviews on social media platforms. Consequently, you should ensure that you meet your customer’s demands and underlying needs. Doing so will allow them to remain satisfied with your brand, and you can grow your customer base in the process.
Trying to do everything yourself
Business owners have to wear many hats and oversee various functions. However, like everyone else, entrepreneurs have weaknesses and strengths. They can only give a finite amount of time and effort to their businesses. That said, trying to do everything by yourself is counterproductive and usually messes things up.
Task delegation is your best friend in such a case. Whether you decide to hire an accountant to handle your finances efficiently or invest in technology to reduce operational and organizational errors, try to divide the functions. It will enable you to offload some of your business’s responsibilities onto qualified shoulders or even outsource them.
Plus, it will give you time to work on core business aspects that direly require your attention.
Expanding too slowly (or quickly)
In today’s cutthroat competitive business world, being proactive but steady is the name of the game. Expanding too slowly means your competitors will take advantage of market opportunities quicker than you, and your business will become obsolete. However, developing too quickly means you’ll take out loans, which can derail your business if the market suddenly shifts in a direction you never predicted.
Focusing on more projects than you can manage while not taking advantage of growth opportunities are two things that can be detrimental to your business. Therefore, instead of doing whatever your rivals are doing, try to be innovative and focus on your core competencies.
Today’s business realm is quite uncertain and unpredictable, given its fast-paced nature. While you cannot avoid every business challenge or obstacle, preemptive thinking will let you tackle them efficiently and emerge as the market leader. After all, the business world is plagued with challenges, and knowing how to tackle them makes an entrepreneur successful.