Why Businesses Fail
Why do businesses fail? Ironically, the main reason is that the business owners didn't take the time to learn why most businesses fail before they ventured into starting a new business. Here are common pitfalls that can lead to business failure. Your mission? Understand them and avoid them!
Small businesses fail at an alarming rate in the U.S. Every day, hundreds of small businesses close their doors because they weren't able to effectively blend the many elements needed for success.
Unfortunately, many of these businesses could have succeeded if they had only known how to avoid the top six pitfalls that commonly plague struggling companies.
1. Lack of planning
Successful small businesses don't just happen. They are the result of intentional and well-executed business plans. Many entrepreneurs are so eager to get started that they neglect business planning and jump in headfirst with little more than a dream and an idea. That might cut it in some arenas, but not in small business. If you have already started your business and don't have a business plan, your first priority should be to get one. Fast!
2. Inadequate funding
Another common reason for small business failure is a lack of adequate funding, especially during the critical start-up period. Inadequate funding severely limits your capacity and threatens your ability to grow beyond the initial stage of life. If you have done your homework properly, you should know how much money it will take to launch your business. Resist the urge to start until you have obtained all of the funding you know you need to do it right.
3. Bad marketing
It's possible to create a business that sells the best product at the best price and still fail because no one knows it exists. Getting the word out about your product is critical if your business is going to have any chance of becoming the thriving venture you think it can be. If you don't know anything about marketing, get help from someone who does. If all else fails, cruise the local bookstore and pick up a few resources that will help you get started.
4. Unreliable suppliers
You can't sell what you don't have. Your ability to maintain proper levels of inventory is directly proportional to the quality of your relationships with reliable suppliers. Developing effective supply channels can take a little time, but if you are having problems with your current supplier don't cross fingers and hope things will get better. Take action! Seek out new supplier relationships and make the switch as quickly as possible.
5. Staffing imbalances
Labor is the biggest expense for most small businesses. Therefore, it only makes sense that it's worth your time to make sure that your company employs the right amount of people. Too many employees and you'll be forced to carry around dead weight. Too few employees and performance will suffer. Striking the perfect balance isn't easy, but the rewards are well worth the effort.
6. Ineffective sales performance
Sales are a key element in the success of any businesses. Poor sales, on the other hand, are an indication that your business might be in jeopardy. Maintain a close eye on sales patterns and trends, and hire the best sales staff you can afford to keep the money rolling in and your company rolling on to the next level.
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