Studies have shown that 8 out of 10 business startup fails, and many businesses are just barely surviving and barely making a profit.
Starting up a business takes a lot of patience, planning, and needs passion. Many entrepreneurs had failed in business because of certain factors that were overlooked in running the business.
Below are 8 Reasons Why a Business Fails:
1. Starting a Business for the Wrong Reasons:
Most people when asked the reason they are starting their own business come up with an answer like; I want to make money, I want to be my own boss or I need more time. Starting a business based on those reasons is a sure way for a business to collapse.
A well-planned business might not start yielding profit instantly, as it might take time for the business to mature to the profit yielding stage, now starting a business just for profit, one might become discouraged when you do not see profit immediately and may be forced to close up. One needs to drive by the passion of the business and stick to the business plan.
Also running your own business might not necessarily give you much time as you will not monitor the business regularly especially if it’s just starting
Most people lack knowledge of the kind of business they intend to go into. While some businesses may require someone to go for an apprenticeship or get a mentor to be able to learn the business properly. Many businesses fail because people lack the proper knowledge of the business and they refused to take the time to learn or go for an apprenticeship program.
This is a very important factor in running a business as capital is the major start-up of the requirement of a business. There is a various way to get capital for your businesses, one can get a loan from a bank or save overtime to start up a business, or get funded by family and friends.
The government in a bid to get more people into the business has started programs to finance business ideas that they dime are worth it. The most business fails most times because of lack of funding, the idea may be very sound in technical terms but the lack of capital can see the business, not progress past a certain stage and this may see the business fail totally.
Lack of knowledge on how to acquire loans for business is another reason the most business fails for lack of capital. We have Bank Of Industry that is there to give a loan to businesses that qualify to obtain a loan based on certain criteria, but people are unaware of this.
4. Management Skills:
Many people lack the necessary management skills to run their business or are not versatile enough in a certain area of the business, they fail to hire people with the right skills and specialization to run this aspect and thus run the business down due to their own mismanagement. Specialization should be encouraged and practice to get the best out of every sector of the business.
Most businesses fail because of a lack of a business plan or sticking to a well-structured plan. Some business plan is drawn in a way you are not expected to take profit for a certain period so that the business will grow, while some might expect you to keep a thin workforce thus you putting more time for the growth of the business. A well-structured business plan needs to be adhered to passionately for the good of the business.
6. Access To Customers:
Any business without a strong customer base is bound to fail. A business for it to succeed need to have access to their customers, to know what they want at a particular time. A cashier who collects cash and record what customers buy, from this record with time and with personal understanding will have a mindset of what some customers buy most and the time and period certain goods are most needed.
This record will help in planning your business according to the needs of the customers. It pays in knowing the kind of customers you have and the environment you run your business.
7. Lack of Growth:
There is a certain business that fails to move with time, they are businesses that should have expanded but fails to do so and died a natural death. The aim of a business is to make a profit and expanding increases your profit potential.
Making a profit and remaining small is detrimental to a business as other businesses might cash in on you not expanding and reaching out to more clients. As you expand, your brand name becomes known and accepted and you will cash in on smaller businesses that did not expand by taking their client as your brand name becomes widely accepted.
A popular businessman when asked the three important things in business, he replied location, location, and location. Building a business, it is advisable to take location into account. You cannot go and open a club in a place where alcohol is banned, or open a betting shop in a place the predominant religion frown against betting.
It is paramount for the success of your business you study the location if it favors the kind of business you intend to start.
Read Also: Tips For Overcoming Business Challenges