This article shows you how to prevent small business failure. Your small business can fail for a number of reasons, including:
- Choice of business idea.
- Wrong business location.
- Inadequate Capital.
- Poor planning.
- Insufficient marketing.
- Your offerings.
- Not researching customers/market.
- High operating costs. – cheap sources of supplies
- Poor business processes.
- Not doing enough marketing
- Poor Customer service.
- Lack of records keeping.
However, if your small business is struggling to survive you are probably not alone. Small businesses are more prone to failure than big businesses. Research findings have found that one of every five new businesses fail before their fifth year of startup.
To to be able to prevent small business failure, you need to identify the causes of the threat to your business which may include, among others: The following tips might help you to prevent your small business from failure.
Wrong Choice Of Business
Wrong choice of business is one of the causes of small business failure. It can even make an otherwise profitable business to fail. It is possible that when you started your small business you made a wrong choice.
In other words, you entered into a business which was not best suited to your abilities. Therefore, you should review your choice of business. After reviewing your choice and you find that you made a mistake, you should consider looking for another business to do.
Improper Business Location
Wrong business location can make an even profitable business to fail.
Therefore, you should take a hard look at the present location of your business. If you are satisfied that the location made sense, you should remain there.
On the other hand, if you discover that the location is not suitable for your kind of business, you should consider relocating to another place.
Insufficient Startup Capital
Another factor that could result in the failure of your business is insufficient capital.
Are you sure that you estimated correctly and provided the funds you needed to start your small business?
If there were enough funds at the beginning, then you should look inwards to find out what went wrong. Furthermore, the tips in the later part of this article should help you to prevent business failure.
Not Reducing Business Expenses
Have you taken the pain to take a hard look at your business expenses? You need to prune down some of the expenses that the business need to run smoothly.
Furthermore, you should prune down other expense items that are only adding little value to your business.
In addition, you should weed out those expenses which are unnecessary for the business to succeed.
Business failure: Poor Business Plan
Improper or lack of planning can lead to business failure. It is possible that when you started your business you had some form of plans put in place.
But ever since, have you reviewed those plans with a view to updating them? As you probably know, business environment changes rapidly. So you need to change with time.
Therefore, you should regularly review your plans to enable you to cope with competition and other realities on ground.
Not Doing Enough Marketing
Insufficient marketing is a major cause of small business failure. The days are gone when you had to seat down in the comfort of your shop waiting for customers.
With the ever present competition and few people having disposable incomes, you need to adopt what I chose to call “aggressive marketing”.
In other words, you should identify where your potential customers hang out and get them to buy from you.
Failure To Advertise Your Business
Advertising your business is a good way to prevent business failure. If you advertise your business, more people will get to know you and your business.
Therefore, chances are that you should sell to more people. You need customers who should buy from you on regular basis so that you can remain in business. Related:Advantages Of Advertising Your Business
Business Failure: Credit Sales To Customers
Selling your goods on credit to customers can easily lead to business failure.
While some of the customers you sold to may pay, others may not. Consequently you might end up having a huge amount of bad debts.
Bad debts are written off to the profit and loss account at the end of the year. They reduce your profits.
Therefore, you should go after all those who owe your business and collect your money from them.
In fact you can take legal action against stubborn debtors, especially if the amount is large. Related: How To Manage Small Business Finances
Not Updating Your Offerings
You need to nose around to find out from the market exactly what your customers need.
If you give your customers what they need, they will not have any reason to look elsewhere.
In addition, you should ensure that your prices are neither too high nor too low.
High Operating Costs
To prevent business failure, you need to make sure that the costs of doing your business are not too high. Keeping your business expenses are tolerable limits should help you to prevent small business failure.
An example is when you have to pay rent for a large shop with only a few goods on the counters.
Furthermore, you should shop for the best sources of the good. High operating costs, especially fixed costs such as rent of a large store will eat deep into you profits margin.
Most importantly, you need repeat customers to enable you prevent business failure. Repeat customers are the most profitable segment of your customer base.
Poor Business Processes
Your business can fail if there is no ease of doing business with you. You should be able to meet customer deadlines. Customers do not like disappointments or delays in delivery of their orders.
Do what you say you will do. Do not make promises you do not intend to keep.
Not Keeping Financial Records
Are you keeping records of your financial transactions? Have you been preparing annual financial statements of your small business?
Do not think that the little amount of money you will pay to a bookkeeper or accountant to prepare your accounts is a loss.
Annual accounts will provide useful insights as to the performance of your business. They should help you to make good business decisions that should move your business forward.
Poor Customer Service
To prevent small business failure, you need an effective and efficient customer service. Poor customer service can wreck your business. Customer service is where business is won or lost. Customer service is to provide solutions to poor services.
What is the quality of your customer service like? Do you give a warm smile to customers when enter your shop, even if you are not happy? Do you thank your customers for their business?
Unsatisfied customers can spread negative news about your business. Therefore, you should do everything possible to make sure that your customers get their need.
Most importantly, you should not allow any customer to go away angry. Make sure every customer smiles away from your shop.
Apologize to customers when things go wrong at your ends. Apologies are free.
By Samuel Ijenhi