How to Prevent Business Failure?

Are you thinking of opening a new small business or maybe you are already an SME entrepreneur? No matter the answer, we are sure that the right question is how to avoid failure?!

For one business to survive, or to be successful there are a lot of unpredictable factors in the game, both external and internal. A lot of business failures (and the same applies to business success too) happen due to issues defined externally.  There are many entrepreneurs of small businesses that have limited experience in management while on the other hand are excellent in technical and professional skills. So, this may be one of the crucial issues that each business faces each day. So, how can you protect your business?

Firstly, we would like to share some interesting statistics with you:

• 90% of the business failures happen because of cash flow problems
• 80% of the business owners spend 2 years working for other businesses, 50% of all businesses form in a period of 5 years, 30% sustain 10 years
• 50% of business owners experience cyberattacks, only 20% of small businesses manage to mitigate vulnerabilities, cyber risks, and attacks
• 50% of the entrepreneurs start their business at home
• 10% of small businesses close each year

Now that you have read the statistics, it is important to know that you are not alone. Take a look at, the people around you. We can say for sure that half of them have pretty amazing ideas, especially when talking about business. I will share one example with you. A friend of mine is really good at preparing desserts and cakes. Every time we spend some time together she likes to make something tasty and give it to us to try and share thoughts. I must admit, they are delicious. So this idea of making a small dessert business had great potential. However, the packaging, the place to sell, and the budget were the challenging things, and very soon that idea was trashed.

That is the story in short. And that is how many people who are innovative fail because they give up too easy thinking that it may not work out, or that there are too many things that are not manageable. There are so many great ideas that get dropped in the bin. But this is the situation of failure for people that are thinking of starting a small business. Now, let’s focus a little bit on why some businesses may experience failure:  

Poor management:

If you want to manage your business with success you don’t only need creative and operational skills but also business and management skills. A lot of business owners lack those skills in areas like financial management, marketing, or customer relations.

Poor invoicing:

If your invoicing practices are not good, then you won’t have the total image of the financial position of your company. This is one really essential thing to consider with financial management.

Source Of Finance:

Be careful from where you get your finances. If your business is starting to experience some financial problems, then making this kind of capital risk will only make the situation worse.

Bad Debts:

Your business may experience an increase in debts due to insolvency or the loss of a customer. There is in-house management for these kinds of situations that takes the right activity to follow up on this matter.

External Causes:

These causes may include some strict governmental measures that can affect a specific industry or sector and become a burden on SMEs. Another thing worth mentioning here is the bankruptcy of your main customer or maybe your supplier.

Now that you are familiar with the most common causes for failures, let’s take a look at the steps that you can take in order to prevent your business failure:

Bring Passion To Your Business:

Having a passion is really important here. By having one you can contribute to delivering something that can help a lot of people. Combine your passion for youR idea together with enthusiasm to let the people know that it is worth it, and also to convince yourself that you can do it.

As we mentioned before, having only an idea is a lot easier than the realization. You need to be consistent and put in the work to get your potential customers to understand that your business is the thing they’ve been looking for.

List The Negative Things That May Occur:

Your idea can be really good and can serve a purpose however you have to look into every angle of it. Since if you miss that, then later you may find out that some things are not working the way you thought they would.

Maybe you just want to enjoy and not think of possible issues from the start. But that is a mistake for sure. You need to list all of the negatives and challenges in front of you so that you can prepare for the risks that may occur someday.

Run a Beta Test:

We are sure that this has happened to everyone. You think that your idea is on the right track, and then you notice something that you don’t like and will need a small adjustment. In this kind of situation, we suggest running a survey and asking for opinions. A beta test or a trial version could work too. Then observe the results you get.

Once the necessary changes are done, you can launch your idea and then constantly follow the reaction of your consumers so that you can improve all the way. Test, launch, observe and adjust. All the way around, again and again.

No Foolproof:

When you will launch your service or product, you have to remember it’s not Foolproof. There is not just one right way to improve your business. There are many considerations that can turn it into a better one. Star small, go step by step. Make versions of your product and let your customers get to know them for some time so that they can provide valuable feedback.

Cashflow:

There is a lot of cash flow issue that startup businesses are struggling with. If you want to have good management of your cash flow you need to keep track of your expenses as well. And maybe consider limiting them if necessary. You need to protect the company’s financial assets so that you don’t face a failure. Every business owner should know of his investments and money flow so that they can maximize profits.

Plan The Future:

It is important to consider things for the future of your business as well. However, you need to bring your decisions based on the data you have and know so that you have guaranteed business success. You need to have an insight and keep track of your business constantly so that you can develop your future plans and make efforts to succeed.

One of the ways for keeping track of your business is using an online solution like dillali . Dillali is an invoicing app for small businesses, entrepreneurs, and freelancers that need help in managing their business finances. You can easily track your money flow, debts, your invoices, and expenses, all in one place. Have you already registered? Try Dillali here for free and learn what it can do for your business to succeed. Handle your business like a pro now.

To Sum Up:

Having some negative feedback is inevitable when running a small business, but this should not get you down and make you quit. Instead, it should only make you stronger and encourage you to achieve that goal. For running a successful business you need good management, keeping track, and forming strategies that will help you grow (and a lot of luck of course )

In the end, we would like just to share a shortlist of the most common signs for a business failure (as we are pretty sure it is the first thing that comes to your mind after mentioning failure)

1. Financial crisis
2. Decrease in sales
3. Deficit of cash
4. Drastic measures, like making drastic spending cuts
5. Late payments from your own customers
6. Losing your key customers

Hope that we shared some useful things to notice here and we wish you success in your business. Enjoy the day and stay safe!

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