When you’re starting a new business, the last thing you want to focus on is failure. But if you address the common reasons for failure up front, you’ll be much less likely to fall victim to them yourself. Here are the top 7 reasons why businesses fail and tips for avoiding them.
According to statistics published by the Small Business Administration (SBA), seven out of ten new employer establishments survive at least two years and 51 percent survive at least five years. This is a far cry from the previous long-held belief that 50 percent of businesses fail in the first year and 95 percent fail within five years.
Even with these better success rates, a significant percentage of new businesses do fail. Opinions abound about what a business owner should and shouldn’t do to keep a new business afloat. There are, however, key factors that — if not avoided — will be certain to weigh down a business and possibly sink it.
1. The wrong reasons. Would the sole reason you would be starting your own business be that you would want to make a lot of money? Do you think that if you had your own business that you’d have more time with your family? Or maybe that you wouldn’t have to answer to anyone else? If so, you’d better think again.
The following reasons are found to be reasons that can help keep a business going for the long term.
- You have a passion and love for what you’ll be doing.
- You are physically fit and possess the needed mental stamina to withstand potential challenges.
- You have drive, determination and patience and a positive attitude.
- Learn from mistakes, failures don’t defeat you.
- You thrive on independence.
- You like/love people. Every businesses owner will have to interact with others.
2. Poor Management: Too many reports show that poor management as the number one reason for failure. New business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees.
3. Insufficient Capital: Many business owners underestimate how much money is needed and they are forced to close before they even have had a fair chance to succeed.
4. Location, Location, Location: Whereas a good business location may enable a struggling business to ultimately survive and thrive, a bad location could spell disaster to even the best-managed enterprise. Factors to consider:
- Where your customers are
- Traffic, accessibility, parking and lighting
- Location of competitors
- Condition and safety of building
- Local incentive programs for business start-ups in specific targeted areas
- The history, community flavor and receptiveness to a new business at a prospective site
5. No Website: Its just this simple… you have a business today, you need a website. Period.
In the U.S. alone, the number of Internet users (approximately 77 percent of the population) and e-commerce sales ($165.4 billion in 2010, according to the US Department of Commerce) continue to rise and are expected to increase with each passing year.
Remember, if you don’t have a website, you’ll most likely be losing business to those that do. And make sure that website makes your business look good, you want to increase revenues, not decrease them.
When it comes to the success every business is different but following these simple steps can help out tremendously. Just as every great player in sports has had a coach business owners need coaching as well.
The role of a Business Coach is to coach business owners to through guidance, support, accountability and encouragement.
For this and more information about Pinpoint Management, Chad Harward, strategic planning, marketing, business development, sales training and true success for business owners please contact us!