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The Reasons Why Most Businesses Fail
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Every single day, many businesses fail for numerous reasons. According to the United States’ Small Business Administration (SBA), approximately 90% of all small enterprises fail within the first two years of operation, primarily because many entrepreneurs lack the basic knowledge and experience in handling the challenges of their company in its initial stages. The following are several common problems that are encountered during this vital preliminary phase. Business owners should be informed about these issues and work diligently to address them in order to avoid failure.

Deficient preparation
Careful planning is essential to success and is reflected by an enterprise’s stability and profitability. Often times, entrepreneurs are so eager to launch their businesses that they neglect extensive preparation, which includes devising a well-developed business plan. This business plan should describe and illustrate the vision for your business, while convincing others to assist you in attaining that vision. The first priority before operating any business is to devise a carefully constructed and well-detailed business plan to ensure a company’s success and productivity.

Deficient funds
Another frequent mistake that many small businesses make is underestimating the amount of necessary funding needed for their company’s start-up. This lack of funding will immediately restrict any business capacity and will greatly threaten a business’ potential growth and stability. Entrepreneurs should always identify and try to properly estimate the amount of money needed to launch their business. It is imperative to ascertain the amount of money a business will require, which includes not only the costs of starting the company, but also the expenses it will take to stay in business. Entrepreneurs should also avoid starting their business if they have insufficient capital to cover costs for at least one year.  

Poor marketing strategy
It is completely feasible to initiate a business that sells the best products and services at a competitive price; however, a company can still be at risk for failure because the targeted customer base may not be aware of the products and services. Advertising is vital for a business’ success, and if the entrepreneur is  unaware of how to properly sell their products to the public, they should seek assistance from a marketing/public relations expert who can help them promote their business effectively. In addition, the number of internet users and e-commerce sales has drastically risen in the past few years. Every company should have a professional looking website where customers can easily find out about the business, locations, products, and services offered.

Unreliable dealers
For many successful businesses, the capability to maintain an accurate inventory of goods is unequivocally correlated to the dependability of an entrepreneur’s suppliers. It may be challenging at first to deal with irresponsible providers, but through proper networking and research, an entrepreneur can successfully cultivate efficient supply channels to find reliable people whom they can work with. It is critical to maintain effective relationships with suppliers for the operation of any company and to actively seek trustworthy dealers if a corrupt one exists.

Lack of credible employees
Labor is the largest expenditure for many small businesses. A company should employ an accurate amount of workers with the necessary skills and credibility for their given field. If a company is overstaffed with many unproductive employees, they will be wasting money for unnecessary labor costs. If there are too few employees at hand, then the workload will be overwhelming for the reliable staff to handle, and as a result, the company’s overall performance may suffer. An entrepreneur should be aware of this employment challenge and create some sort of equilibrium in the workforce by delegating tasks to competent employees and to avoid hiring those who are not experienced.

Unproductive sales
A company’s sales are one of the key constituents in the success of any business. Lack of sales, on the other hand, is a warning that a business may be in jeopardy. Businesses should always be aware of a company’s patterns and trends in sales, and be prepared to handle any fluctuations their company may present. They should also be knowledgeable of their competitors, adjust prices of products and services accordingly, and employ competent sales staff who can most benefit the business.

Lack of product diversity
Some businesses may only offer one product or service. This lack of variety can be dangerous because if production ceases, the entire business may fail. It is important for all companies to have some sort of diversification of goods and services to ensure sales.

Company reputation
A company’s reputation is important for success. Issues involving customer service, professional behavior exhibited by employees and managers, cleanliness of a store, prices, quality of goods, follow-ups, etc., are issues that all affect a company’s overall standing and credibility. A company with a good reputation is more successful and lucrative than one with a poor status.

Overexpansion
Overexpansion occurs when business owners confuse their company’s success with how quickly they can expand their business. This leading cause for a company’s bankruptcy can be avoided if business owners concentrate more on their company’s slow and steady growth before considering any expansion. Once a solid customer base is established and steady profitability is seen, business owners can then work on developing and expanding their company.

Location
A company’s location is also critical for the success of a business. A good location may facilitate a struggling business to ultimately thrive, whereas a company situated in a poor location will be at a disadvantage. Some factors to consider when establishing your company’s location is where the targeted customers live, the traffic, accessibility, and parking, the physical distance from competitors, and the condition and safety of a building.

There are many issues that can undermine a business’ potential for success. Every business owner should be aware of these concerns and view these company challenges as an opportunity to learn and grow as entrepreneurs. They should also address these matters completely and do whatever is necessary for their business to succeed.

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