As per a report, more than 50 percent of the new businesses fail in the first year itself and almost 95 percent of the businesses fail within five year of their inception. Most of the new businesses fail because of poor planning and not able to survive the market conditions. However, there are some key factors that if not avoided, may weight down a business.
Starting the Business for the Wrong Reasons
The purpose of starting the business should be pretty clear. Many of the entrepreneurs think that they can make a lot of money and become powerful if they have their own business. Merely having these purposes may lead to possible failure of your business. Instead a business started with these reasons has better chances of success.
* You strongly believe in your business idea and have a passion to make it successful. You also believe that your product or service has enough demand in the market and fulfill the need of customers.
* Attitude is a key factor to make a business successful. With strong determination and patience, a positive attitude keeps a businessman optimistic even in the odd conditions.
* Not giving up even if you see failure in your business. You take it as a learning process.
* You enjoy independently working and are capable of taking charge of accomplishing tasks to complete the most challenging tasks within time constraints.
* You like to interact with your subordinates and enjoy their work. Also, you can deal with all types of individuals.
Poor Management
Poor Management is cited as one of the most crucial factors for a business failure. The new entrepreneurs lack required expertise to manage different functions of a business such as finance, marketing, HR, sales, operations, etc. If all these functions are not properly handled, the business will see disaster sooner or later.
A regular study, planning and controlling all activities of the business should be done in order to know which areas are prone to risk. Market research and customer buying behavior should also be studied regularly to know the changing market trends. It helps in reconsidering the current strategies and taking required steps. The management team should be able to motivate the subordinates and create an encouraging climate across the organization. A good leader is one who is able to make his vision a reality and has the foresightedness to see the opportunities for the future.
Not Having Enough Capital
Insufficient operating funds are another key reason for the failure of a business. Many budding entrepreneurs fail to estimate how much capital is needed to run the business and so forced to close down their business in the initial phases itself. Also, they make unrealistic projections for future and if those are not met, they fail to continue business.
It is extremely important to correctly estimate the working capital and cost of staying in the business. Your venture may not run in profit for initial one or two quarters, you must have enough funds to keep it going. You also need to plan how the revenue generated through sales is going to meet all the costs occurred.
Bad Location
A good location can settle down a struggling business whereas a bad location may ruin even the best-managed companies. In the excitement of setting up a company, many owners ignore the location of their business and ends up founding himself in severe difficulties later. Therefore, before choosing a location for your new venture, proper research and study should be done. Some of the factors you can think of are-
* Where your target market is?
* Suppliers, transportation, other basic resources
* Where your chief competitors are?
* Safety and security of the company premises
* Local people and their receptiveness to a new venture
Lack of Planning
Starting the Business for the Wrong Reasons
The purpose of starting the business should be pretty clear. Many of the entrepreneurs think that they can make a lot of money and become powerful if they have their own business. Merely having these purposes may lead to possible failure of your business. Instead a business started with these reasons has better chances of success.
* You strongly believe in your business idea and have a passion to make it successful. You also believe that your product or service has enough demand in the market and fulfill the need of customers.
* Attitude is a key factor to make a business successful. With strong determination and patience, a positive attitude keeps a businessman optimistic even in the odd conditions.
* Not giving up even if you see failure in your business. You take it as a learning process.
* You enjoy independently working and are capable of taking charge of accomplishing tasks to complete the most challenging tasks within time constraints.
* You like to interact with your subordinates and enjoy their work. Also, you can deal with all types of individuals.
Poor Management
Poor Management is cited as one of the most crucial factors for a business failure. The new entrepreneurs lack required expertise to manage different functions of a business such as finance, marketing, HR, sales, operations, etc. If all these functions are not properly handled, the business will see disaster sooner or later.
A regular study, planning and controlling all activities of the business should be done in order to know which areas are prone to risk. Market research and customer buying behavior should also be studied regularly to know the changing market trends. It helps in reconsidering the current strategies and taking required steps. The management team should be able to motivate the subordinates and create an encouraging climate across the organization. A good leader is one who is able to make his vision a reality and has the foresightedness to see the opportunities for the future.
Not Having Enough Capital
Insufficient operating funds are another key reason for the failure of a business. Many budding entrepreneurs fail to estimate how much capital is needed to run the business and so forced to close down their business in the initial phases itself. Also, they make unrealistic projections for future and if those are not met, they fail to continue business.
It is extremely important to correctly estimate the working capital and cost of staying in the business. Your venture may not run in profit for initial one or two quarters, you must have enough funds to keep it going. You also need to plan how the revenue generated through sales is going to meet all the costs occurred.
Bad Location
A good location can settle down a struggling business whereas a bad location may ruin even the best-managed companies. In the excitement of setting up a company, many owners ignore the location of their business and ends up founding himself in severe difficulties later. Therefore, before choosing a location for your new venture, proper research and study should be done. Some of the factors you can think of are-
* Where your target market is?
* Suppliers, transportation, other basic resources
* Where your chief competitors are?
* Safety and security of the company premises
* Local people and their receptiveness to a new venture
Lack of Planning
A careful, methodological and strategic planning is required for success of any business. Most of the new ventures die before getting matured due to lack of a concrete planning. The key points which are included in the planning for a business are given below.
* Description of vision, mission, goals and success mantras for the business
* ed human resource for each function
* Identifying the possible problems and finding out their solutions
* Financial resources, income statement, balance sheet, cash flow analysis, sales forecast, expenses projection, etc.
* Competitors’ analysis
* Advertising and marketing strategies
Poor Diversification and Expansion Strategy
One of the leading reasons of business failure is poorly designed diversification and expansion strategy. Many entrepreneurs go for overexpansion of their business ignoring the status of the industry. The rapid expanding companies are often get bankrupted.
The expansion and diversification strategy should be adopted after a lot research and putting enough thoughts. Not going for expansion may repress growth and do not attract investors. A good cash flow management system will help you in setting your growth strategy. After all getting all research work done, you need to identify with whom and when you will have an alliance to grow your business. Right people for each job should be kept in place to avoid over dependency on you.
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