‘Experience is simply the name we give our mistakes’ – Oscar Wilde
Businesses may fail due to various reasons and being aware of these situations can help you cope better with potential problems.
Why do businesses fail and what can you do to stop it from happening to yours? Here are six of the most common reasons:
Lack of understanding of your customer
The customer is the most important reason why you are starting a business in the first place. Most entrepreneurs tend to rush into developing a dream product or service without giving adequate though to customer behaviour, preferences, habits, budgets and emotions.
Solution: Make it a priority to study the preferences and habits of your customer beforehand. This will give you an edge over your competitors who have not invested their time into this all-important task.
Poor business plan
While all businesses have a business plan, the difference lies in the quality and detail. A business plan should be able to articulate exactly what you plan to achieve, how you plan to achieve it and realistic cash flow projections (this is where most plans go wrong).
Solution: Don’t fast-forward the business planning stage. Pay attention to every detail and work on making a complete and realistic business plan.
Lack of clear information and communication about your product or service
While most entrepreneurs work on making their product or service different from the rest of the pack, they fail when it comes to talking about it. Keep your communication clear, detailed and make sure you tell your target market what you can do for them.
Solution: Customers will not invest in your product unless they know what it is. Communicate clearly and tell everyone about your product.
Underestimating the competition
It can be fatal for a business to underestimate its competitors. Since your competitors are out for a slice of the same target market, make sure that you never ever underestimate them.
Solution: Respect your competition and be aware of their strengths; it will help you create your own strategy.
Poor decision making and weak leadership skills
This is another common pitfall that causes businesses to crumble. If you have been employed before, you need to change your mind-set to business entrepreneurship. Take your time to make decisions and factor in all the relevant factors before you do so.
Solution: Hire an experienced and qualified manager to make the right decisions.
Trying to do everything yourself
You might be good but you’re not that good. Use your strengths and expertise in the areas that you specialise it, but for the sake of your business, don’t try to handle the stuff you really don’t know very much about. Many small businesses fail because the owners try to manage, run, do the accounts, deal with customers, market, advertise and everything else all by themselves.
Solution: If you need someone to run the company site, design a logo or manage your accounts but don’t have the skills you need, outsource the work to someone else.
Being aware of common pitfalls of business can help you avoid costly mistakes later one. Do you run your own business and learn valuable lessons along the way? Share your story (or link to it) in the comments below!