There are no secrets to SUCCESS. It’s the result of PREPARATION, HARD WORK and LEARNING from FAILURE – Colin Powell
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As an business owner, it is not expected that you know every aspects of the business. It’s normal that some minor and obvious things might escape your mind or might confuse you, but that might end up you to business failure or some unexpected consequences. So to help you out here are some of the foremost and common reasons that leads majorly all businesses to failure, or new comers stumbled in a pitfall of the business. With the help of this measures, business owners and entrepreneurs will be able to smartly and smoothly overcome the pitfalls of the businesses and can manage their businesses with more efficiency and accuracy.
Foremost Reasons for Business Failures:
- Not executing Performance Marketing
Performance marketing is a result based approach marketing technique helping businesses by tracking and measuring the marketing campaigns, enabling them to optimize their strategies based on data-driven performance. Businesses established from many years, usually do not adapt to new techniques and market trends. Hence, by not adapting modern marketing techniques, businesses are led to become failures.
- Lack of Customer Focus
Businesses are made for customers, but many times focusing on developing the supply side of business, they forget understanding customer needs. It leads to a huge gap between customer demand and supply of product or service, resulting in a decrease in sales. Many businesses are set back due to this reason only, losing their market share in revenue. Hence, not keeping customer needs at priority will definitely lead to failure of business.
- Not preparing a Contingency plan
Successfully running the business for many years, creates a confidence among leaders in planning their business plans. No doubt having expertise in planning various business plans is an advantage for the business, but not having a contingency plan will definitely ruin all the efforts of planning. Even leaders do not know the future uncertainties, so not having a contingency plan will definitely bring failure to the business.
- Discontented partnerships
Partnerships are not always promising success to both the businesses. Always a risk factor plays a major role till existence of partnerships, especially in global partnerships and tie-ups. However, many legal documents are now being practised to reduce the risk factor as much as possible. Business leaders should focus on gaining maximum benefits for the business by their proactive communication, and not turning it into liability for them in future. Thus, unsatisfactory partnerships are amongst the reasons for business failure.
- Poor cash flow management
Businesses might increase their expenses for buying inventory or investing in growth of business, but on the other hand income does not increase at the same rate, it might decrease also. Not able to maintain and manage cash flow many times leads to lack of adequate capital and also deficiencies in emergency funds. Hence, due to not managing cash flow appropriately businesses are also led to failures.
- Irregular Business Plan
Many businesses do not value the importance of business planning, but it is the most significant document of the business for communicating to investors and the board of the business. A well defined business plan is crucial for outlining goals, target audience and strategies for success. If a business lacks in preparing a well defined business plan, it will surely be lacking capital in the future. Thus, lack of business plan leads to lack of capital that further leads to business failure.
- Weak Leadership
A leader who does not know how to guide its business and how to align goals of business and employees, and how to motivate employees, will always take the business to its failure. An effective leadership is essential for guiding the business, making data-driven decisions and leading the business to its financial goals by motivating employees of the business. Therefore, weak leadership is also one of the foremost reasons for business failures.
- Poor Market Research
Specifically, businesses running with traditional methodology do not consider to adapt changes. They fail to understand their target audience and research the market trends for innovating their existing product. Thus, businesses that fail to understand their target audience and competitive market, struggle to find their niche to attract more customers. Thus, poor market research will also lead to business failure.
- Not Innovating
Many businesses after a certain point of time, become stagnant, they do not want to take any further risk of innovating. Due to that businesses gradually lose their share from the market and hence further also lose their existence in the market. Sometimes the reason behind not innovating is also fear of losing, but that does not bring any advantage to the business. Thus, one of the biggest reasons for business failure is not innovating.
- Unable to manage capital
Many businesses are not able to gather investments when required. Reasons for not being able to gather investments might be negative cash flow, improper business plan, lack of business documents or any other reason. Business leaders need to be prepared several ways ahead of time, so that they can arrange capital whenever required. Hence, inability to manage capital is one of the common reasons for failure of a business.
These are the some of the repetitive reasons that leads to failing of business. Creating a accurate business plan, focusing on customer needs, hiring a strong team and implementing effective marketing with a proactive leader are keys to a successful business. However, the following measures will help the businesses to avoid common pitfalls to manage a successful business.
Common Pitfalls That Lead to Business Failure:
- Not Creating a USP product
In recent cluttered markets, every business thinks that they are unique but in reality, it is invisible in the saturated market with their competitors. So instead of pushing the marketing team to grab attention, focus on establishing a Unique Selling Proposition [USP] product or service that automatically separates the business from the masses and pulls the attention towards your business by targeting the correct business audience.
- Not Interacting with Other Entrepreneurs
Interactions with other entrepreneurs will provide many different ideas, deep understanding about businesses, effective connections, exposure of market trends and many more transparent conversations with entrepreneurs and owners will make it easier for you to take business related decisions. Even sharing your experiences might help other entrepreneurs in their businesses. Thus, make as much as effective and helpful interactions with other entrepreneurs to avoid any pitfalls in business.
- Failing to set business parameters
New business owners and entrepreneurs need to frame business parameters before taking their businesses on higher level, so that operations and management works in alignment in future when business is operating at diversified levels. This helps employees, boards of directors and leaders to work within a framework and initiate work by focusing on parameters, this also increases credibility in market. Hence, setting business parameters should be considered to avoid unnecessary failures.
- Running out of cash on hand
A major pitfall of businesses is running frequently out of cash. Specifically, new entrepreneurs experience this more often, due to lack of awareness and experience in it. So to avoid it, consider preparing budget and be consistent in following it. Avoid making unnecessary and unplanned expenses as much as possible. In today’s uncertain market in which demographics changes rapidly, keeping cash in hand and spending it smartly within allocated budget is best way to avoid unnecessary pitfalls in business.
- Pursuing to many opportunities at once
Entrepreneurs will try to grab every opportunity that comes in their way which looks interesting and grabs their attention. Its obvious that all entrepreneurs will definitely try to pursue each and every opportunity, but not all opportunities comes with benefits for the business many come with failure for the business. Hence, learn to be clear with your SWOT analysis and do not grab all opportunities at once to avoid unnecessary problems at once.
- Not Delegating the work
Every entrepreneur thinks that they are all alone, and try to work independently without even asking for help to their colleagues. By doing this, entrepreneurs burnout themselves and even loss their time and ability to think differently as a entrepreneur. Hiring and trusting experts and advisors to run the business by discussing ideas, strategy, and development with them will the business to do fewer mistakes. Hence, develop the habit of delegating the work as well as power in order to occur fewer mistakes.
- Doing extraordinary commitments to Investors
Usually in early rounds of funding, entrepreneurs do commitments to investors which are even not necessary, like committing to provide weekly reports, early access to rights and shares and many more. It leads to increase in labour work, and the company ends up working for investors instead of customers. Of course providing this commitments will get you funding, but it will increase the repetitive laborious work for long term, instead try to communicate smartly and actively with investors to get funding. Hence, do not ever over-commit to investors instead practice proactive communication.
Conclusion
Avoiding these pitfalls will not promise you immediate success, but an effective working habits that will lead to successful business. Even after being familiar with these pitfalls and its consequences, still willing to repeat these mistakes in your businesses is not helping the business in any segment or at any time. Thus, develop a habit of consuming what is bad, learn from it and implement something good from it.
