Archive for July 16th, 2012

4 Reasons Why Small Businesses Fail

July 16th, 2012

It is no longer news that 99% of all new business ventures fail in the first ten years. Since the dream of every entrepreneur is to build a successful business, here are, tactfully highlighted, 4 major reasons why small businesses fail and how you can bulletproof your business against them. Join me as I expose these business killers:

1. Poor Attention to Generating Sales:
If a business cannot attract customers, then it will fail. Closing sales is the core mission of all for-profit businesses, and yet it is the most common reason for business failures. A company’s business plan must specify the sales process. Will customers be attracted by advertising and promotion alone, or will it require salespeople to obtain business? Is the nature of the business that it will need inside or outside salespeople, or both? Will the owner or partners be the salespeople? Will salespeople need to be hired, or will the sales function be contracted out to a marketing representative company? If this basic need is not addresses and implemented successfully, the business will not be successful and will most likely fail

2. Lack Of Managerial Skill:
When a small business owner lacks the managerial skills required to drive the business to greater heights, the business is bound to fail. An entrepreneur that wants to succeed must be able to effectively handle the employees, cash flow, production line and so on, or the business owner must be able to hire a good manager to run the business.

3. Wrong Business Decisions:
This is common to everyone irrespective of your field. There are many instances where, after carrying out critical analysis on a particular situation, the entrepreneur comes up with a decision considered favorable. But on implementing that decision it backfires, and at the end of the day it results in anything from unwanted tax audits, regulatory agency compliance issues, employee resistance, unexpected customer reactions or even lawsuits.

So whenever you decide on an action to be implemented on your business, consider asking friends, business partners and professionals for advice. It is going to save you the stress of cleaning up the mess resulting from wrong business decision taken.

4. Harsh Government Economic, Fiscal And Monetary Policy:
This is a problem for both large and small businesses. As an entrepreneur, you must be on guard to bulletproof your business against the ever-changing government fiscal and monetary policies.

Since you cannot influence or alter the government’s decisions, you must be prepared to swiftly adjust your small business to align with the government rules. This will help prevent it from being hit by the adverse effect of unfavorable government policies. Instances of such government policies and effects you must keep an eye on are tax reporting and compliance matters, double taxation, duties and levies, exchange rates, policies that effect inflation, and so on.