February 22nd, 2010
Starting a small business is a dream of every person who do a 9-5 job but most of them never start mainly because of the fear of failure which is completely justified. According to SBA reports more than 90% of the startups fail within their first two years of establishment. So in this article I have tried to share some common reasons because of which most of the businesses fail and how you can avoid them. Without further ado here is the list.
Treating business as hobby – Turning your hobby in to a business is a good thing to do. But just because you love to do something doesn’t guarantees that you would become a successful business owner. Running a business is completely different and demands lot more commitment and skills from you. In a hobby you don’t have to answer anybody but when you start doing the same thing for money then you have to be accountable for the work you do.
Customers are not ready – Most of the times entrepreneurs are so convinced about the success of their products that they don’t even realize the importance of taking opinions from their potential customers. The great product you are trying to sell is of no use if your customers are not willing to pay for it. Hence it is very important to do the proper research amongst your target audience to find out whether market is ready for your product or not.
Unrealistic expectations – Unrealistic expectations like generating high revenues from day one or getting rich overnight often leads to business failure. You must understand that developing a profitable business requires lot of time and patience.
Poor cash flow management – Maximum number of businesses fail because of the lack of cash instead of the lack of profit. Make sure that the money you spend doesn’t exceed the money you collect from your customers over any period of time.
Giving importance to short term profit- We all love earning huge profits. But overlooking long-term profits for short-term profits will eventually leads to business failure. You might have heard the story of the golden goose that laid golden eggs. Consider your customers as the golden goose and if you try to be greedier by overpricing your products they will stop coming to you which means that you will lose even that profit which you were getting earlier.
Expanding too fast – Time and again, business owners get very excited with the initial success and start expanding their business really fast. They create a notion that the product which gets successful in one area will be successful everywhere which is not always true. Sometimes these expansions can also lead to bankruptcy. The expansion should only be done after you have a solid customer base and proper cash flow.
Underestimating the power of marketing- Customers won’t come to you of their own, you have to go to them and tell about your business. There are tons of ways online and offline which you can use to market your products. Start experimenting with different marketing methods and continue with those which generate effective results.
Ignoring your competitors- Your unawareness about your competitors could be a good reason for your business failure. It is very important for you to know about your business competitors. What products are they (competitors) selling and at what prices, what are their marketing strategies, what additional gifts they are offering etc.
Low customer retention rate – According to studies, you have to spend 20 times more to acquire a new customer when compared to cost for retaining an old customer. Poor customer services, high pricing and low quality products are the most important reasons for low customer retention. In current situation where you have to face tough competition in attracting new customers, your business won’t survive for a long period if it can’t retain its old customers.
Doing everything yourself- Sometimes entrepreneurs think that they are perfect and can handle everything themselves which leads to the failure. You can’t be good in everything starting from production to marketing. Hiring experts to work for you not only help you to get the job done in a better way but it would also give you sufficient time to focus on creative tasks of your business.
Guest Post by: Gagandeep Singh
Gagandeep Singh is working for Fortepromo which creates high quality Promotional Products that help companies to promote their brand in market.
EmbracingMyJourney L.L.C. was created by Caryn FitzGerald in 2008.
Caryn, known as "The Manifesting Queen" is a motivational columnist, speaker and writer, she has been featured in and published several books, including "Tulips In The Sand" "Fish Sticks, Books and Blue Jeans" “Manifest Success” “Visual Arts Junction Interviews” & “Online Marketing Success Stories..."
Caryn is a domestic violence survivor who has triumphed over a 10-year battle with anorexia and bulimia. She is a wife, mother, healthy-aging-specialist, writer, speaker, blogger, coach and a health food enthusiast Click to connect with Caryn at her website
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