The rate of failure for businesses is quite high, and it is not just about startups. Many factors are involved in running a business and some can hit and backfire. According to a rough estimate, small businesses are the biggest victim of business failures. More than 50% of them fail within the first 4-5 years!
You start up with a lucrative business idea, you hire a competent dedicated team, work out all the details, and even plan for the contingencies. Since handling finances is the biggest cause of business failures, you even get one of the professional financial staffing solutions. But still, many external factors are not in your control. And before you can fix it, your business collapses.
Common Reasons for Business Failures
Failure is real. So, being a hopeless optimist wouldn’t help. Therefore, let’s first analyze some of the top reasons for business failures and then move on to the recovery phase.
Too Much Debt
Taking debt to finance the purchase or launch of a business is the norm. But many businessmen fail to prioritize debt repayments. Doing so in a timely manner inevitably hinders the growth of their business operations. In various business surveys, entrepreneurs across the globe have reported the lack of capital and cash flow as one of their top challenges. They end up plagued by debt.
To avoid drowning in debt, consider alternative funding methods such as portfolio loans and crowdfunding to finance their business ventures. 401 (k) has also emerged as a popular business financing method without having to incur tax penalties and taxable distributions.
We all remember our experiences with bad bosses when we finally become a boss ourselves. Being a leader is quite challenging. And you have to realize that your employees, clients, and vendors are going to look at you as a true reflection of your business as a whole. While no one expects perfection in leadership roles, mastering some leadership skills is pivotal to the success of any business.
- There has to be a clear and consistent vision.
- The communication with the team should be smooth and effective.
- They should be able to give and receive productive feedback.
- The leader and the team should know how to execute business operations.
Poor Management of Cash Flow
Since the businesses are scaling and growing, it’s imperative that the account receivables are well-managed. One of the biggest reasons for business failures is when the companies fail to make adjustments with the cash flow whilst the business is growing. They run out of operating capital before they know. One tactic to deal with this is to offer incentives to your clients to pay early on in lump sums. Once things start moving steadily, you can define a proper payment system.
Lack of Strong Online Presence
If you are sticking to a brick-and-mortar business site, then you should probably consider having a modern upgrade to an online website! Businesses and brands, which don’t have an impactful online presence are essentially deemed old-school and non-progressive. Take heed and market yourself with a proper official website and across various social media forums such as LinkedIn.
If your customers can’t find you online, they will give up on you and will go to a competitor.
Trying to Cater to Everything Yourself
There’s no point in hiring a team of talented and smart experts if you are going to do everything yourself. Being a leader, you shouldn’t be indulging in micromanagement. Learn to outsource and distribute work and express your confidence in your employees. Overburdening yourself with the things your teammates can handle will overwhelm you. And you will not be able to perform in your leadership role.
Other than all the above mentioned, lack of entrepreneurial, management and business experience are also common issues. Now the question is, how to get up!
Action Plan for Bouncing Back in the Market
If, unfortunately, your business has failed, then instead of despairing, learn from your mistakes and strike back with a better plan. Let us help you.
Breakdown the Reasons for Failure
First things first, you need to essentially analyze the causes of your business failure. It’s impossible to go on a new business journey when you are not done understanding what went wrong the last time. Take your time to understand them and the reasons behind them. Most of the reasons will be easily identifiable. Work out all the bad decisions in your business’s timeline. And take heed to not make the same mistakes again.
Get the Finances in Order
You need to get all your personal finances in order. Since your business is gone and you are eventually going to try to come up with a new and better plan, finances are going to play a vital role. If you have a whopping amount in your savings account, consider handling it well. Because if your last business venture ended up on a verge of bankruptcy, you will need better management of finances this time.
Take Some Time Off
Before you venture into your next new project, take some time off. Entrepreneurship is a full-time and demanding affair. Most of the entrepreneurs are reported to log 60 or more hours of work every week. That’s a lot! Losing a business isn’t a great thing but it has brought you an opportunity to unwind, rejuvenate, and then take your next mission head-on with refreshed nerves. If you can afford, take a vacation, explore new hobbies, meet friends, go on a yoga retreat, spend time doing what you love, and so on.
This phase of de-stressing will allow you to be more creative with your new business proposals. With a clear and fresh mind, you will be able to come up with better ideas.
Consider Working with Other Entrepreneurs
You need to expose yourself to more entrepreneurs. We are not essentially suggesting partnerships and joint ventures. You can attend networking events with them and indulge in some friendly chitchat. You can also connect with other entrepreneurs on social media. Share your experiences and listen to theirs. You are sure to get new ideas, perspectives, and inspiration. And you will be making new business contacts along the way.
The best part is you will be able to figure out new ways to handle the problems you faced while losing your business. Empathy will make you feel good too.
Come Up with New Business Plans
Finally, come up with a few business plans and work out which suits you the best. Business failures shouldn’t prevent you from dreaming and becoming big. If you always dreamed to be a founder of one of the biggest Telecom staffing agencies, follow it. If you want to be a fashion designer with your own line of fashion attires for every season, do it. If you want to be the next big name in real estate, keep working on it!
Don’t let yourself be discouraged and keep sketching out promising ideas for your business. Good luck!