Seven Deadly Ways Leading to Business Failure

Why do half of all startup businesses end in failure?

Of the new businesses opened every year, statistics show that about half or 50% have closed shops. In every business that fail, you can always see some or all of these seven (7) deadly factors, which are interrelated. Knowing these factors and how to avoid them will greatly ensure the survival of your business, resulting to growth, expansion and profitability.

These seven factors that kill a business are the following:

1. Poor location. Location is a prime factor, as this is the heart of the market that gives you the customers and your niche. Location applies to retail, foods, service, and even to manufacturing and distributorship ventures. Therefore, in your business plan, you must consider the importance of accessible location, proximity to markets, and traffic patterns (foot and vehicle), and the size of the neighborhood. Poor location leads to poor sales and losses.

2. Lack of capital. This is obvious, and sufficient capital for your business cannot be overemphasized. Limited capital can be cured by having enough money to start a business, because sometimes it takes longer to reach break-even operations than you expect because of unknown or unforeseen obstacles inherent for a new business. If you think your capital will fall short, then you must have a scheme on how to get additional investment money, or a bank loan, a credit line, or infusion from friends.

3. Poor Credit Practices. Selling too much goods or services on credit, especially beyond your capacity to finance it, can be disastrous. You can run out of the capital you need for your business operations. So, right from the start, if you cannot arrange to have charge cards, bank or credit institutions to take over the financing of sales, do not extend sales on credit. Manage your capital wisely.

4. Competition. Competition is a fact of life. It is given and present in all kinds and types of business, and in any place and location. The best way to fight and survive the competition is to find your niche in the market, and to adopt competitive pricing, display, promotion, and by having good quality products and services.

5. Lack of promotion. This is one of the basic factors. Unless your target customers in the market know that you exist, they will not go to you. So promote your business using advertising, public relations, billboards, handbills, and other medium appropriate to your business. Once you got buyers, be sure to convert them into loyal customers by providing them with good service, so that their referrals will attract more buyers to your business.

6. Limited experience and know-how. This is one of the major causes of failure. Do not venture into a business in which you have no adequate knowledge and experience in running it. Learn first the trade and the tricks of the trade. Or you can hire somebody who is an expert in the field and let him manage the business for you, while you are learning the ropes. Do not lose your hard-earned money and savings and others’ investment because of your inexperience.

7. Bad business practices. Ignoring customers, suppliers, employees and their needs can lead to your business collapse. Put your customers first, and learn participatory management based on feedback, consensus decision-making, and good human relations. Having good relationships with the people in which your business depend for its existence is always the best policy.

Having already known these seven factors that kill a business, our tasks now is how to avoid them. For entrepreneurship is not only about taking risks, but also avoiding dangers. This is the only way to achieve our business objectives – survival, growth, expansion and profitability.