5 Reasons Your Small Business Will Fail, and How to Avoid a Failure

5 Reasons Your Small Business Will Fail, and How to Avoid a Failure

A research conducted by Small Business Administration has found that just 50% of new businesses manage to survive for the first 5 years, while only a third of startups can survive for a decade. A report published in Forbes, based on research by Bloomberg, also states that 8 out of every ten businesses bite the dust in the initial 18 months after being set up. Here are 5 top reasons why your business can fail – things that you should be mindful of to prevent a failure.

Failure of Leadership

Businesses often collapse due to poor management skills. Unless you have sufficient experience in making decisions about management, supervision of staffs or the vision that is required for leadership, you are likely to fail in steering your organization. Bad leadership will have an impact on every area of your company, whether it comes to employee morale, money management or productivity. It is a good idea to find a mentor and get training from him in leadership.

Not being unique

You can have an amazing service or product that is in high demand, but your business might still be facing a downfall. This could happen if you have a mediocre approach or lack a robust value proposition. In case there is high demand, it is possible for you to have many competitors and may fail to stand out from the competition. It is essential to use an original approach and have products or services with USP.

Not having a USP (Unique Value Proposition)

If you wish to publicize your brand, you have to improve your marketing plan. Do all that you can so as to present that USP to the market, so that you can get a share of the market and boost conversion rate. Use tested methods, direct mail, cold calling, word of mouth and social media. Make sure that you have an online presence that is optimized properly. Develop contact information capture and lead generation techniques, and offer superior content on your website as well as information giveaways and subscriber newsletter.

Being out of touch with the needs of customers

Unless you stay in touch with what your customers require, and act on their feedbacks and responses, you can expect a failure of your business before long. Check their level of interest in your offerings, whether the market is declining, what your customers are telling you etc. These questions are important to consider. Else, you will keep on offering services or products that have fallen out of trend and your business will stare at downfall sooner rather than later.

Poor Financial Management

A business news resource, SmallBizTrends, has recently shared an infographic stating that only 40% small businesses manage to generate profit while 30% break even and the rest lose money. If you wish to establish a successful business, you have to watch where every penny goes. Other than tracking every bit of your expense, you also need to have a contingency financing plan to prevent a downfall of your company in case of a financial emergency.