One of the unfortunate facts about small businesses is that many of them fail. There are many possible causes for failure. Some of these are due to lack of planning while others are related to the economy and consumer demand. If you’re seeking small business success, it’s important to be familiar with some of the reasons you could potentially fail. Here are the top 10 small business fail reasons.
Not Creating a Business Plan
Business plans are not only essential when you’re applying for loans. They’re also crucial for making sure you’re clear about your vision. Creating a business plan forces you to map out every step of your business to ensure all of your bases are covered.
Flawed Business Model
Not all business ideas are practical. Just because you’re interested in something or it seems like a great idea doesn’t mean that it’s something that will attract customers. Make sure you do thorough market research before you invest time and money into a business.
Lack of Capital
You need a certain amount of capital to get a small business off the ground. Many businesses fail because they underestimate how much working capital they need. A general rule is to assume that you’ll need at least a year before your business becomes profitable. You also have to plan for issues such as late-paying customers, lawsuits and economic downturns.
Insufficient Marketing and Promoting
Just because you open a business doesn’t mean that customers will automatically start knocking on your door. You need a marketing plan that targets the right customers and makes them aware of your business and products. Whether your business is online or offline, you need a website and a social media presence. You also need a certain budget for paid advertising to draw the right people to your business.
Too Much Overhead
One essential consideration for small business success is keeping costs down. If you’re spending too much on things like equipment, office or warehouse space or hiring more staff than you can currently support, you’re going to run out of cash quickly. You must carefully consider expenses and seek ways to minimize them. It’s better to gradually scale up than to overextend yourself and burn through all of your cash.
A business needs a clear vision to succeed. If leaders or partners don’t agree on fundamentals, there’s bound to be conflict. This has a harmful effect on the entire business. Before you partner with people, make sure you share the same vision.
Lack of a USP
A Unique Selling Proposition/Point or USP is what sets you apart from the competition. If your product or service is identical to something that’s already available, it will be difficult to attract loyal customers. To avoid this small business fail, it’s necessary to identify a UVP. This is something to emphasize in all of your marketing and branding efforts.
Employees are Under-skilled or Unmotivated
Unless you’re running a solo enterprise, your employees are a major factor in your success. It’s important to recognize the specific skills, both hard and soft, that your employees need to help you succeed. It’s also essential to choose people who are a good fit for your vision and who are motivated to make a real contribution.
Low Quality Products/Services
One of the simplest reasons that a business may fail is that it delivers poor quality products or services. Quality control is more important than ever in an age when customers can leave reviews all over the internet. Businesses can no longer afford to compromise when it comes to quality. This also applies to customer service.
Losses Due to Bad Debt or Fraud
Small businesses today must be vigilant about security. This includes both internal and external security. Thoroughly vet employees to reduce the chances of internal fraud. Cybersecurity is essential for any business with an online presence. Credit card debt and loans with unfavorable terms can cause bad debt to build up, another common cause of small business failure.
If you’re looking for a way to resolve cash flow issues in your business, you should consider invoice factoring. Find out how Riviera Finance can help you continue your business growth with working capital today.