Seven reasons why new small businesses can fail
It has been estimated that about one out of every two new small businesses fail within their first three years of start-up. What are the most common reasons for this?
More often than not, it is due to a lack of research and inadequate preparation, that can lead to the selection of a business that just is not sufficiently profitable. Not enough facts and too many assumptions, and typically these assumptions having been overly-optimistic.
More specifically, the seven most common small business pitfalls are ....
- Lack of a long-term plan with unclear goals and objectives
- Not properly understanding the buying habits of their customers and what customers really want
- Failing to properly evaluate the strengths of the competition - which can result in incorrect pricing of the product and where it is "positioned" in the market
- Inadequate financial planning and underestimating all of the actual operational expenses in running the business
- Lack of ability to effectively train, manage and motivate staff
Operational procedures and systems that are inefficient and not properly documented
Inability to adapt to a changing business environment, caused by the entrance of new competition or by existing competitors changing their own marketing strategies
Many of these common small business pitfalls can be avoided through ensuring that you undertake effective training in business management skills and also perhaps consider finding yourself a good business mentor / advisor.
If a way can be found to avoid these seven business pitfalls, then another eventual challenge for the business founder becomes learning to let go of some of the business operational details. As the business grows, the owner must learn to rely upon trusted employees who can take on more responsibility for the running and future expansion of the business. For more specific tips on how to do this, see Management of Staff
This can be much like a parent learning to allow their children more autonomy and independence as they mature. It is not easy, but offers the prospect of the reward of having created something that is able to "stand-alone" and a different type of satisfaction.
You might also like to have a look at "E-Myth" for some other insights into causes of small business failure
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