How to Prevent Business Failure

How to Prevent Business Failure?

Are you thinking of opening a new small business or are you already an SME entrepreneur? Regardless of your answer, we are sure that one of your main concerns is your business failing. In this article, we will share tips with you on how to avoid business failure.

There are unpredictable internal and external factors that determine whether a business will survive or not. A lot of business failures and successes are results of external factors. Small business owners having limited experience in management even though they have excellent technical and professional skills is a very common reason why some businesses fail. This might even be you. So,  how can you protect your business?

Firstly, here are some interesting statistics to know:

  • 90% of business failures happen because of cash flow problems
  • 80% of business owners spend 2 years working for other businesses
  • 50% of all businesses form in a period of 5 years
  • Only 30% of businesses last longer than 10 years
  • 50% of business owners experience cyber attacks
  • Only 20% of small businesses manage to reduce risks and cyber attacks
  • 50% of entrepreneurs start their business at home
  • 10% of small businesses close every year

Bet these are relatable? Take a look at the people around you, lots of them have pretty amazing business ideas. For example, a friend of mine is a fantastic baker. Anytime we have a friend get together, she makes tasty pastries for us to try and give feedback, and I must admit, they are delicious. So, the idea of making a small dessert business was born as we all thought she had potential because of her skills.  However, when she considered factors like: packaging, a shop, and a budget, she was faced with challenges and trashed the idea.

In the same way, other people who have innovative ideas fail because they give up quickly when they are faced with challenges. 

Next up, I will share some reasons why your business may experience failure:

Poor management:

If you want to manage your business successfully, you don’t only need creative and operational skills but also business and management skills. Some businesses fail because business owners lack these skills: financial management, marketing or customer relations.

Poor invoicing:

If invoicing is not done properly, the total image of the financial position of the company would be unclear. Learning to make invoices correctly is essential to financial management.

Source of capital:

Be careful where you get finances from. If your business is starting to experience some financial problems, getting money from the wrong place could put you in more trouble.

Bad debts:

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

External causes:

These are factors like: strict governmental measures which affect specific industries or sectors and become a burden on SMEs, and bankruptcy of your main customer or supplier.

Let us take a look of the steps that you can take in order to prevent your business failure:

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Being passionate:

Having passion in what you do is important because it drives you. Combine your passion with hard work, and you will achieve a lot.

As mentioned before, only having an idea is a lot easier than doing the work. You need to work hard and be resilient, because most times, it takes a while for your business to actualize and for potential customers to understand that your business is the thing they’ve been looking for.

Anticipate challenges and list them:

Your ideas can be innovative, however, you have to analyze everything carefully. Because if you don’t, things may not fall into place as planned.

Don’t procrastinate on making the list! Prepare yourself for risks that may occur.

Run a Beta Test:

A common occurrence is entrepreneurs thinking that they are on the right track, then they notice things they need to adjust. Surveys are very helpful when it comes to this as they give insight to what you might not have thought about. Beta test or a trial version could work too.

Once you make the necessary changes, you can launch your idea and constantly follow the reactions of your consumers so that you can keep improving. Test, launch, observe, adjust and repeat.

No Foolproof:

When you launch your service or product, keep in mind that nothing is foolproof. Business is not one size fits all. Start small and go step by step. Make versions of your product and communicate with your customers so you can improve based on their feedback.

Cash flow:

There are lots of cash flow issues that startup businesses struggle with. If you want to have good management of your cash flow, you need to keep track of your expenses, and consider limiting them if possible. You need to protect the company’s financial assets and know of your investments and money flow so that you can maximize profits.

Plan ahead:

You need to make informed decisions based on the data you have, have insight of your business, and keep track of your business constantly so that you can achieve your goals. One way to keep track of your business is using an online solution like Dillali is an invoicing app for small businesses, entrepreneurs and freelancers that need help in managing their business finances. You can easily track your income and expenses all at 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.


Negative feedback is inevitable when running a small business, but this should not frustrate you or make you quit. Instead it should motivate you to improve. Good management, keeping track of changes and planning ahead will help your business improve.

Before you go, here is a short list of the most common signs for a business 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 you found this post helpful,  we wish you success in your business. Enjoy your day and stay safe!

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