Thinking about failure is usually the last thing you want to do when you start a company. But small businesses do fail, nearly half within their first four years. Knowing why may prevent you from becoming another casualty. Here are the Top 10 reasons small businesses fail (in no particular order):
1.Bad Financial Planning. You wrote your business plan, and you have the cash to get started. Now, go back to your financials and forecast, realistically, how much money will be coming in and going out to ensure you don't run out of cash. Start with realistic but precise goals for your firm, including deadlines. For example, don't just say that you want to increase sales; instead, decide that you want sales to reach Rs10,00,00 by next the holiday season. Then write down the steps to meet those goals on time, and set deadlines for completing those steps. Consult your goal list every day, and make sure you are meeting your objectives.
2.Procrastination. Tasks and paperwork can quickly stack up. Putting them off until you "have time" to deal with them will eventually overwhelm you. Either tackle them or seek assistance, but don't avoid them.
3.Excessive Overhead. Hire only employees who are essential to your operation. When you do hire employees, make sure they're well trained and able to complete the tasks expected of them. And don't forget to supervise them. Remember that empowered employees make good workers - try to create a work environment that keeps your staff motivated.
4.Ignoring the Competition. Gone are the days of unquestioned consumer loyalty. Today, the customer searches for the best products/services for the best value even if that means breaking off a long-term business relationship. To be successful, you must devote time to studying your competition. You can be sure they are watching you. Always be on the alert for new methods, products, or services.
5.Bad Sales and Marketing. Very few products sell themselves. If you don't have an effective sales and marketing strategy, you may as well not make the product. Sales and marketing can be expensive and are almost front-loaded expenses. Make sure you have enough cash to cover these expenses and be prepared to hire a qualified professional to help you. Nothing cheapens a product or a service more than unprofessional literature or website.
6.Bad Customer Service. Once you've won over a customer, don't ignore them. Work on ways to improve customer service and always follow through. If you don't, your customer will find your competitor(s) and switch, even if the product or service is not as good. You would be amazed at how far simply common courtesy goes toward cementing a relationship.
7.Lack of Versatility. This is often overlooked. Everyone gets comfortable after awhile. As a sharp and aggressive company, you will look at different markets and services for your existing products and continually look for new products. You want to anticipate and benefit from changes in product demand bell curve. According to Will Rogers, the noted humorist, "Even if you're on the right track, you'll get run over if you just sit there."
8.Location, Location, Location. We have heard it many times - and it is true. Location is critical to the success of most businesses. When you're scouting a spot, consider factors such as traffic (How many potential customers pass your business during the course of an afternoon or evening?) and convenience (How hard is it for your regular customers to get to your location on a regular basis?).
9.A Closed Mind. Always keep your mind open to new ideas and new ways of doing things. Stay on top of the game. Talk to people who know more than you, read books, magazines, and web sites, and visit businesses that can help you network with your peers in the business community.
10.Unrealistic Valuation. If you think your company is worth more than it really is, you will never be able to attract investors. Be willing to discuss on equity ownership issues and keep your eye on the final goal -to build a profitable business. In the end, "half a watermelon is a lot more valuable than all of a grape."
1.Bad Financial Planning. You wrote your business plan, and you have the cash to get started. Now, go back to your financials and forecast, realistically, how much money will be coming in and going out to ensure you don't run out of cash. Start with realistic but precise goals for your firm, including deadlines. For example, don't just say that you want to increase sales; instead, decide that you want sales to reach Rs10,00,00 by next the holiday season. Then write down the steps to meet those goals on time, and set deadlines for completing those steps. Consult your goal list every day, and make sure you are meeting your objectives.
2.Procrastination. Tasks and paperwork can quickly stack up. Putting them off until you "have time" to deal with them will eventually overwhelm you. Either tackle them or seek assistance, but don't avoid them.
3.Excessive Overhead. Hire only employees who are essential to your operation. When you do hire employees, make sure they're well trained and able to complete the tasks expected of them. And don't forget to supervise them. Remember that empowered employees make good workers - try to create a work environment that keeps your staff motivated.
4.Ignoring the Competition. Gone are the days of unquestioned consumer loyalty. Today, the customer searches for the best products/services for the best value even if that means breaking off a long-term business relationship. To be successful, you must devote time to studying your competition. You can be sure they are watching you. Always be on the alert for new methods, products, or services.
5.Bad Sales and Marketing. Very few products sell themselves. If you don't have an effective sales and marketing strategy, you may as well not make the product. Sales and marketing can be expensive and are almost front-loaded expenses. Make sure you have enough cash to cover these expenses and be prepared to hire a qualified professional to help you. Nothing cheapens a product or a service more than unprofessional literature or website.
6.Bad Customer Service. Once you've won over a customer, don't ignore them. Work on ways to improve customer service and always follow through. If you don't, your customer will find your competitor(s) and switch, even if the product or service is not as good. You would be amazed at how far simply common courtesy goes toward cementing a relationship.
7.Lack of Versatility. This is often overlooked. Everyone gets comfortable after awhile. As a sharp and aggressive company, you will look at different markets and services for your existing products and continually look for new products. You want to anticipate and benefit from changes in product demand bell curve. According to Will Rogers, the noted humorist, "Even if you're on the right track, you'll get run over if you just sit there."
8.Location, Location, Location. We have heard it many times - and it is true. Location is critical to the success of most businesses. When you're scouting a spot, consider factors such as traffic (How many potential customers pass your business during the course of an afternoon or evening?) and convenience (How hard is it for your regular customers to get to your location on a regular basis?).
9.A Closed Mind. Always keep your mind open to new ideas and new ways of doing things. Stay on top of the game. Talk to people who know more than you, read books, magazines, and web sites, and visit businesses that can help you network with your peers in the business community.
10.Unrealistic Valuation. If you think your company is worth more than it really is, you will never be able to attract investors. Be willing to discuss on equity ownership issues and keep your eye on the final goal -to build a profitable business. In the end, "half a watermelon is a lot more valuable than all of a grape."
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