Business Small Business

What Is The Primary Reason That So Many New Businesses Fail?


Running and plan to start a new business is not easy at all. You need to start your own business, if it’s small or large you need to create a business plan, business strategy and etc.

Did you ask yourself before why small businesses fail?

1.Poor management and planning

Your small business can fail because of poor management. That reason is particularly true for brand new owners of small businesses.

This isn’t about ignoring your passions. Instead, it means you need to do some research and planning for the business.

2.Lack of Data

You do need to collect as much information as you can. When you don’t have an insight into your business results in real-time, your ability to make smart, data-driven decisions will be drastically limited.

For example, you need full disclosure about the revenue you collect and the expenses you pay. You’re basically flying blind, without that experience.

For a business owner, you need to know what percentage of revenue you can assign to employee wages, payroll bills or rent so you can set the best cost savings targets. On the revenue side, you want your company to expand from month to month, or from year to year.
If you don’t achieve your goals, you might want to look at areas of your business where you’re overspending — that’s the expense side. It’s important to know your net profit to ensure that your costs don’t surpass your revenue and turn your company into a failure rate statistic.

3.No marketing or advertising

When you start to make a small business you need money to make ads and marketing to reach many people through Facebook, banners in streets, flyers and etc.

4.Poor location

You have chosen the wrong place to open your business, maybe your business not suitable for the place or the people who lived around so when you start a small business make sure that place location is suitable.

5.No website and No Social Media Presence

If you have a business today, you need a website and a social media presence. It’s very important to start your small business by making a website for your business to reach to many people and be popular.

A growing business should have a professional-looking and well-designed website that allows users to find out easily about their company and how to make use of their products and services. If you have local consumers, your website should include your address, phone number, and operating hours, which should be identified in Google My Business so it can appear as shoppers search by location for what you are selling.

Even if you don’t have customers coming to your place of business and/or you get most of your business through networking and referrals, you need a website so that potential clients can research your business before they call you. If you don’t have a website and your competitors do, you’re going to lose out.

For the same reason, you need to have social media profiles about the services that your clients are most likely to use. If you don’t, you’re not going to look professional and lose business to competitors who do have profiles on popular social media sites, at least.

6.Poor leadership

You have to be a good leader, in charge of and responsible for the employees, taking care of them give them good salaries and all the aspects of hiring to hire qualified employees.

When you have poor management skills, which can be obvious in many ways, your company will fail. You will fail as a leader if you don’t have enough expertise in making decisions about management, leading a team, or the ability to lead the organization.

Perhaps the leadership team doesn’t agree on how the company should be run. You and your members will disagree publicly with each other, or contradict the orders of each other to the staff. When there are problems requiring strong leadership, you may be reluctant to take over and solve the problems while your business continues to slip towards failure.

7.If you Don’t hire a good accountant

When you start a business you need to hire a good accountant to take care of all money of the business and being controlled.

8.If you Don’t know your Competitors

When you start a new business you have to know that your competitors well. You have to know what you have and your competitors don’t and focus on this to be creative more than them and try to search about your top competitors on Facebook, and then try to follow them and to know each updated because if you are going to provide the same like them and you just start and no one know you so your business will fail.

9.If you Don’t make a survey about your product

You didn’t take the opinions of your products from the customers if they like it or no, maybe they have an option to add it to your product.

10.Poor Financial Management

You have to know where the money in your company comes from and where it’s going to go so that your business succeeds. When you don’t have a contingency funding plan, your company will also fail, a reserve of money that you can call upon in case of a financial crisis. Sometimes people start businesses with a dream of making money but they don’t have the ability or interest to manage cash flow, taxes, expenses, and other financial problems. Poor accounting practice places a company on a straight path to failure.

11.Cash flow problems

Your business will fail if you don’t have enough money to pay your liabilities. And the reason for cash flow is low profit.

12.Insufficient Capital

A common business money mistake is having insufficient operating funds for failed businesses. Sometimes new business owners don’t understand the cash flow or underestimate how much money they will need to start the company. As a consequence, they are forced to close before they have a fair chance of succeeding. They may also have an unrealistic expectation of sales revenues coming in.

Ascertaining how much money your business will require is imperative. You need to know not only the start-up costs but the cost of staying in the business. It is important to realize that it takes a year or two for many enterprises to get going. This means that you will need sufficient funds to cover all costs until sales can ultimately pay for those costs. This calculator will help you predict how much money you’ll need to start your business.

13.Over-expansion and Rapid Growth

Every now and then a company is rising much faster than it can keep up with. You open a website with a trendy product and you are immediately inundated with orders that you can’t carry out. Or maybe, the opposite is real. You are so convinced that your product will take the world by storm that you are investing heavily and ordering far too much inventory and you can’t move it right now. Both of these are further paths to business failure.

14.Inventory Mismanagement

If your inventory is poorly managed your business startup can’t be successful. Problems with inventory ranks are among the big reasons for the failure of new business. Weak management can also lead to shortages and overages in inventories — silent cash flow killers.

It is an inexperienced mistake that happens quickly to new companies who don’t recognize their selling patterns. The best way to overcome this is to use inventory tracking software or a point of sale (POS) program that can monitor inventories and provide reports showing the best and worst selling items to help you recognize sales patterns.

If you don’t keep track of your top-selling products, or whether they are in high demand, you’ll experience stock shortages that will shrink your profits.

See Also
Difference Between Franchise and Corporate
What are the different types of startups