One of the most daring things that a person can make is starting a business. It is accompanied with ambitions, anticipations, and the joy of becoming financially free. However, the gloomy reality is that not all businesses are going to survive a couple of years. It has happened to me that I have witnessed individuals who begin with a lot of enthusiasm only to drop out at a later stage due to the non-occurrence of events as they thought they would.
Having learned and seen various business owners, I have come to understand that most of the businesses fail due to five big reasons. Such causes are quite widespread, but lots of people do not care about them. Knowing them can make any person develop a better and more prosperous business.
The former is the initial significant cause, which is poor planning. Most individuals enter into business without preparing. They just consider the profit and forget the struggles. A business without a proper planning will fail very easily. Planning is a process that entails researching the market, knowing the needs of the customers and planning ahead in case of any challenges.
There are those who even fail to write a business plan and simply guess the way to go. Guesswork business is business building without foundations. In my case, my lesson is that planning is time-saving, errors are minimized, and it brings clarity. Any business will suffer and end up failing without proper planning.
The second cause is not having proper financial management. Money is the life of any business and when it is spent recklessly then the business starts facing a downward spiral. There are business proprietors who do not record their income and expenses. They merge their own cash and business cash, which generates confusion. A large number of them spend profits prematurely without remembering the fact that the business requires money to expand.
Bad financial management also entails poor pricing. There are others who sell below the expected prices due to their desire to attract buyers without realizing that they are in the process of burying their business. I have personally observed how effective money management can make a business to be stable. Having no it, even a brilliant business idea cannot last long.
The third significant cause is lack of understanding the customers. Customers make a business to exist and therefore neglecting their needs is not a good idea. There are other entrepreneurs that fail to pay attention to reviews. They feel that they already understand what the customers want. But the market is always changing and the needs of people are changing as well. Any company that is not prepared to change will lose its customers.
Effective business enterprises take time to research on the consumer behavior, acting on the complaints as well as enhancing their product or services. Customers will merely move to another company in case they feel that they have been ignored. It is not a hard task to understand customers, one should have patience and attention and a desire to become better.
Inconsistency and commitment is another major cause of failure of many businesses. It is not difficult to open a business but to remain dedicated is the challenge. There are those who are too quick to quit since the outcomes are not forthcoming at a rapid pace. They become demotivated, decrease their work power or even holes up in the business. This is because consistency is what distinguishes those who own businesses and succeed, and those who fail.
Growth takes time. The customers require time to trust you. Profit takes time to grow. However, that gradual process is not yet ready by many people. I have also understood that just showing up in the daily basis even when things are hard, the business would slowly get stronger. Without dedication, failure is inevitable.
And the fifth and last cause is ineffective marketing. No good product can sell itself because people are not going to purchase a product that they are unaware of. This is the reason why many businesses fail as they only rely on their close friends and relatives. They are not marketing their brand, they are not advertising, and they are not utilizing social media well.
Others too lose the fact that marketing is not just about posting, but it is about creating value, narrating your story, and getting your audience involved. In the modern world, there is a lot of competition and only businesses that promote themselves survive. Marketing is the best as it creates awareness, and it brings new customers to the business and makes the business grow in a faster manner.
In summary, bad financial management, poor planning, inability to understand customers, lack of consistency and poor marketing are the five reasons that lead to business failure in the contemporary world. When I reflect on them critically, I understand that most of these issues could be evaded provided the business owners took time to study, train and be disciplined.
Managing a business is not a coincidence, but a process that requires constant planning, management, learning, and improvement. Anyone that heeds such reasons and makes efforts on them will stand better chance of developing a successful and lasting business.