We often find people starting businesses or working in a business that started off booming, sales were great, employee retention was great, and the revenue was also high. Although some businesses start off doing great and show promising results, we often find them vanishing from one moment to the next and then find ourselves asking what happened. In fact, 45% of all new businesses will fail within the first 5 years of opening their doors. This is a result of a failing, and whether you owned a failing business, worked in one, or have seen a business in your neighborhood fail, the truth is that you want to avoid that at all costs. This is when you should ask yourself why is this business failing?
There are several reasons why a business is failing, and it can range anywhere from financial issues to marketing failures. Your job as a business owner or aspiring business owner is to avoid these things at all costs, and if they cannot be avoided then at least find a solution as to how to get yourself out of that hole if you ever find yourself in that situation. Here are a few reasons why your business is failing.
1. Financial Hardship
One of the misconceptions of being a business owner is that there is always money coming in, when in reality that is not the case. The truth is that many businesses will experience periods of great revenue and periods when they are just squeaking by. A smaller business may be able to survive this, however, a larger business that pays multiple employees, pays high rent prices for their space, and pays taxes may take a harder hit.
Whenever we reach this moment, we find ourselves seeking funding that comes with high-interest rates and ultimately lead businesses into a bigger hole if they do not begin gaining revenue soon. If you want to avoid going down this path, then consider sitting down with an accountant to see what your options are, whether it’s making budget cuts or cutting employee hours, the solutions to these issues can be found in your own business.
2. Poor Management
Like the saying “happy wife, happy life,” you should consider this saying to your employees as well, as they are the backbone of every business. Another big reason why businesses fail is because of poor management, whether the manager is a micromanager or simply does not pay any mind to their business, it can ultimately result in failure. Employees can make or break a business whether they plan a mass exodus due to horrific management conditions or they run wild because of lack of management this will result in your business not meeting its goals and ultimately failing. As a manager your job is to be a leader, this means that you must show authority, but also give your employees a chance to grow.
3. You Cannot Beat the Competition
This is something that should be taken into deep consideration when planning your business. It is important to research your competitors to see what they have to offer, and how you can offer a better experience. Amazon is one of those competitors that has pretty much swallowed its competition and has ultimately led to many businesses shutting down as a result of their growth. Although it is inevitable and as time continues to pass we will find ourselves losing to the competition. It is up to you if you want to change with time or if you want to stick to the same ways.
4. Cannot Control Business Expenses
This ties in very well with the financial hardships that were mentioned before. Many business owners find themselves spending more when the money is coming in. Whether it’s taking out the team to elaborate happy hours or buying expensive new computers for the office, business owners will find almost any excuse to spend, and this is a result of a poor budget plan. If you find yourself spending a lot of money carelessly, then it’s time to sit down and create a budget. Sometimes that is all you need to make sure that you always have funds in your account.
5. Out of Touch With Customers
This pertains more to businesses that have something to sell. Customer feedback is extremely important, and if they see that you are not taking their feedback seriously then they will do their business elsewhere. Remember the customer is always right, and you should always take their feedback into consideration even if it can be a bit hurtful to you or your values.
6. Poor Business Plan
When starting your business and making the necessary plans, one of the first things that you should do is to pick a business model that works. By making a sound business plan, you will be able to put the necessary procedures in place to ensure that your business is profitable. However, some businesses fail to make a proper business plan that can be considered profitable, and do not make the necessary changes when things begin to go under. This can result in a lack of revenue and ultimately shutting your doors. The most important thing you can do here is to act quickly and make the necessary changes to your business plan.
Venturing out into a new business can be a bit scary, and the thought of it possibly going under can be quite intimidating. You should not let these things intimidate you. The truth is that most of these things can be prevented, and with the proper preparation and guidance your business will be on the path to success. If at some point you see the signs that your business is not doing too well, then you should take that time to sit back and analyze the issue at hand.
Remember that as an entrepreneur you’re not expected to have money at all times, and there will be low periods and high periods, what you do with that is up to you. Do not consider yourself a failure just yet, but instead consider this a time to reflect and use it as a time for growth.