I can accept failure, everyone fails at something. But I can’t accept not trying. – Michael Jordan
Let’s face it – not all small businesses manage to become success stories. For some, it may happen owing to a disconnect between the product being offered and the demand in the market. For some, it may just be a matter of being in the wrong place at the wrong time! However, it is often owing to stagnation – being stuck in a rut!
According to a recent study, 90% of Indian startups fail within the first five years.
And the most common reason of failure is lack of innovation — 77% of venture capitalists surveyed believe that Indian startups lack new technologies or unique business models.
In order to grow, it is essential to undergo and understand failure. Sometimes, knowing what not to do is the clearest path to success.
Let’s look at the top few reasons why small businesses fail!
Here’s Why Small Businesses Fail!
Here are 8 reasons why your small business might face failure!
1. Starting Your Business For The Wrong Reasons:
Before even starting the business, it is important to understand what drives you. Entrepreneurs exhibit passion and determination. The reason for starting a business could be your belief in your product; that it will solve a genuine problem or need in the market. Or you are extremely independent as a person and can derive better results with your own startup.
However, if the primary reason for you to start the business is the desire to make a lot of money or you will get to spend more time with your family as compared to in a demanding job, then your business is bound to fail in the due time. The reason behind this is your intent and not having done enough research.
2. Poor Management:
Poor management is one of the most common reasons why small businesses fail. New business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees. All of these are the main pillars on which business operations are carried out. If the business owners don’t recognise what they don’t do well and seek help, the company may fail and go out of business.
3. Insufficient Capital:
A common fatal mistake for many failed businesses is having insufficient operating funds. New business owners often don’t understand cash flow or underestimate how much money they will need for startup and they are forced to close before they have had a fair chance to succeed. They may also have unrealistic expectations of incoming revenues from sales.
4. Inappropriate Location:
Location is critical to the success of most local businesses. Whereas a good business location may enable a struggling business to ultimately survive and thrive, a bad location could spell disaster for even the best-managed enterprise.
Consider these factors as far as location is concerned:
- 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, flavour and receptiveness to a new business at a prospective site.
Thanks to technology, small businesses can now develop an online identity and operate even from home! However, it is necessary to do this the right way – lack of planning is one of the major reasons why small businesses fail.
5. Lack Of Planning:
As the saying goes, failing to plan is planning to fail.
If you don’t know where you are going, you will never get there.
Having a comprehensive and actionable strategy allows you to create engagement, alignment and ownership within your organization. It’s a clear roadmap that shows where you’ve been, where you are and where you are going next.
An absence of clear-cut plan describing the business, its vision & goals, market analysis, financial planning, human resource planning will lead to business failure.
6. No Website And No Social Media Presence:
Simply put, if you have a business today, you need a website and social media presence. Period.
It’s important to at least have an updated website that is well designed enabling users to easily find out about their business and how to avail themselves of their products and services.
Absence on social media is looked upon as carelessness and can be very irritating for a user searching for your official handles but not being able to find any information. In that case, the ball lies in your competitor’s court and you are losing on good business. It will not only cost you your valuable potential customers but also give them a notion of you not being up to date with business trends.
7. Not Being In Touch With Customers:
A complete understanding of one’s customers is imperative to the success of any business. Your customers hold the key to your success deep in their pain, behaviour, dreams, values and the jobs they are trying to accomplish.
Only the one who understands pain points of the customers can solve their problems through a verified solution. Indulge in dialogues with your customers and try to really stay in touch with them if you want to become successful and take your business to the next level.
Communicating the brand message to your customers in a clear, concise and compelling manner is the most basic and fundamental to a business.
8. Overdependence On A Single Customer:
If your biggest client walked out the door and never returned, would your organization be ok? If that answer is no, you might consider diversifying your customer base, a strategic objective in your business plan.
Never depend on one single customer for the majority of your revenue, as your business can fail miserably, should they decide to go astray.
As listed above, there are so many reasons why small businesses fail. One of them is insufficient funds and we help you find just that.
Get in touch with Gromor today to avail an unsecured loan and never ever fail at your business!