Spoiler alert: Small businesses sometimes fail. In other words, success is anything but guaranteed. Although poor management and a lack of capital are among the reasons small businesses fail, sometimes multiple factors are in play.
To improve your chance for success, learn about and avoid the following common reasons small businesses fail.
Reasons Small Businesses Fail
Even if you do everything right, your business can encounter challenging circumstances that may result in failure.
So, stay alert and avoid these causes of small business failure.
Choosing the wrong business.
Before you started selling widgets, did you find out if anyone wants to buy one? If demand exists, can you sell enough widgets at the right price to pay your expenses?
Essentially, if you choose the wrong product or service to sell in the wrong place at the wrong time, your business might not last.
Reasons Small Businesses Fail: Having No cash
Starting a business on a shoestring is asking for trouble. After turning the lights on and opening the doors, a store needs time to become self-sustaining.
Protect yourself and your chance to live your dreams by having ample cash on hand when you start. At a minimum, have enough cash to support your business and family for six months.
Not Knowing Your Target Market
Some businesses might succeed simply by hanging a sign outside their door. If this happens, it’s an exception, not the rule.
Intense competition and evolving customer expectations mean that you must identify and focus on a target market. When you know your ideal customers, you’ll need to know how to reach them.
If you need help developing a winning marketing plan, please contact ABS Marketing.
Do you know how much you want to earn from every sale? Is that number realistic? You won’t sell your products and services if you price them too high. If your prices are too low, you won’t earn enough profit.
Ignorance of competition
Eventually, your competitors will find out about your small business. If you’re not prepared, they might catch you at a vulnerable time.
Although competitors can threaten you, they can also help you. Study them to see what they do well. Also, learn from their mistakes. Use them as a benchmark to assess the performance of your store.
Doing too much
You need business, so you naturally feel tempted to do whatever it takes to close a sale. However, by drifting from your core competencies, you set yourself up for failure.
For starters, you can’t deliver high-quality work when you’re doing things that are beyond your expertise. Consequently, your brand’s reputation will suffer.
So, don’t try to be all things to all people. Focus on what you do best. Only spend your time doing things that will help your business achieve its goals.
Depending on a big customer
You feel good when you manage to land a big customer. However, serving that customer can require almost all your organization’s resources. So, you can’t build your customer base while you have that customer.
So, what happens when that customer goes away?
Grow a stable business by serving numerous small and mid-sized customers. That way, you’ll survive as customers come and go.
Growing too fast
You started your business to sell products and services. Right? So, when the orders start pouring in, that’s a good thing. However, sometimes you can try to do too much, too quickly.
Small businesses often fail when they grow too fast because they lack the necessary time and cash. You need money to buy the inventory and supplies needed to meet demand. You also need time to produce the goods and services that you’ve sold.
So, what happens when you don’t have enough time and cash? Your customers become unhappy. You overextend your bank account and your team.
In other words, your small business needs managed growth.
Doing it all yourself
When you do the work, at least you know you’ll do it right. However, after a while, you may feel overwhelmed. When that happens, you become stressed, quality suffers, and you can lose business.
So, stop trying to do everything yourself. Get help. Build a team that can help you take your business to the next level.
Other reasons small businesses fail
By now, you’re getting a good picture of the pitfalls that can destroy your business.
However, you need to think about a few other issues that can cause failure:
- Bad location.
- Poor customer service.
- Inadequate training.
- Absence of a business plan.
- Failure to get advice.
Are you ready to start living your dreams? Get ABS Accounting Liberty SC on our side. Contact us today to find out how our accounting, bookkeeping, payroll, tax prep, and strategy services can help your small business.
We can help you avoid the above reasons small businesses fail.
Meanwhile, to learn more, check out this infographic at Entrepreneur.com.