10 Causes of Business Failure
Do you want to start a business but afraid of business failure? I will be putting you through on the main causes of the many business failures and how you can avoid them.
Any entrepreneur starting a business venture has PROFIT in the back of their mind. Owning a business can be rewarding and at the same time very risky. There are certain factors that can cause business failure but lack of proper research for profitable market before venturing is one of the main cause of business failure.
YES, you can be passionate about something or a particular type of business but have you asked yourself if the business will be profitable in your location.
As it is, there is no business that is not profitable, but if your business is not located at a place that the product/market is required, it will not sell or be profitable.
Passion is a key for success in business but it cannot guarantee profitability. If you are passionate about something but cannot monetize it, and yet you venture into it, then you are more of a social entrepreneur who might be providing a service for no or minimal reward.
It is pertinent that you do a thorough research, consult before you venture into any business. Nobody wants a failed business. The pride of every entrepreneur is to see his/her business growing and making steady profit.
Some entrepreneurs have started businesses but because of some certain factors, the business becomes a failure after a short while. I will be discussing some underlying causes of business failure with you.
Outline of Causes of Business Failure
- Not Seeking Professional Advice
- Lack of Good Customer Care
- Copying Others
- Lack of Experience
- Lack of Personal Growth
- Poor Location
- Lack of Focus
- Wrong Expectation
- Quitting Too Soon
1. NOT SEEKING PROFESSIONAL ADVICE
No matter how informed you feel you are, once you want to startup a new line of business, it is pertinent that you seek professional advice. This will help you ascertain whether or not the business is profitable as you thought. Most times, entrepreneurs start up a business because they find others doing the business and profiting. Yes, they might be profiting from the same business but there might be a secret behind the success. It might be location, good customer service, knowing the right source to get raw materials etc.
It is good you have a mentor that will always put you through to avoid silly mistakes. Another advantage of seeking professional advice is that, you are meeting people that have already done the business and they have made the mistakes and known the best way of doing it.
One of the best pieces of advice I can give to anyone in business is never stop learning, read and learn about marketing not just about your industry but how other industries buy and sell products and service and how you can do things even better.
Avoid Negative People
2. LACK OF GOOD CUSTOMER CARE
It is very important that you make your customer care a priority. A business with good customer care grows. Good customer care brings return customer and return customers bring referral customers. If you do not treat your customer well, they go to your competitors. Learn to show your customers that you appreciate them. Always ask them questions about the product and offer them some percentage when they give your product a review (either positive or negative review). If you are not close to your customers, if you treat them like every other seller, they will only come when there is no other option. Bad customer care has killed a lot of businesses.
Your Customer Care Unit Defines Your Brand
3. COPYING OTHERS
What worked for Mr. Francis must not work for Mr. Reader. Many people have gone into business or made a business choice because they see others doing it and think they can be successful in it if they try. It is good you add your own idea after proper consultation, that will distinct you from others. Copying without consultation leads to dead end.
Do Not Copy, Initiate
4. LACK OF EXPERIENCE
Lack of experience is one of the causes of business failure. If you are inexperienced or your management is made up of novices, then your business is as good as dead. When starting a new business, it is advised you get the services of people experienced in that field. They can be your partners or you employee. Get experienced marketers and well trained customer service personnel.
You must be accountable for any dime your business makes. Most times, many entrepreneurs could not account for their daily sales. Once there is a sale, they spend the money on personal needs believing that they will make another sale. If you must succeed in business, you must be accountable for every dime that you make. Make sure you plan out your spending, for a business you plan to grow, 60% of your profit must go back into the business and that is after removing tithe (10% of your income).
6. LACK OF PERSONAL GROWTH
Many entrepreneurs do not invest on themselves. They want to be great but they do not read nor research, neither do they attend seminars and workshop that can increase their knowledge base. Personal development of your attitude and communication skills is a must. It is hard work and it takes discipline. You will have a hard time succeeding without protecting and working on your attitude. No one gets ahead in life without building themselves with new knowledge.
Never Stop Learning
7. POOR LOCATION
There was an entrepreneur who had a coffee shop in a local area. His coffees are nice and affordable. He relates very well with his customers. But over the years, his coffee shop was not growing and he could hardly maintain the place so he decided to sell the shop. Another 29 year old entrepreneur with enough capital felt he can make the coffee shop profitable by injecting cash into the business and making it classier. He also could not make the coffee business profitable. Why? Because of the business location.
Bottom Line, you cannot start a business where the service is not required. Making it classy will not make people to patronize you. A good market survey is required before a business location is chosen.
Poor Location Equals Reduced Patronage
8. LACK OF FOCUS
Entrepreneurs can easily be distracted with too many minor tasks. Everyday that their focus tends to shift, their thinking shrinks. A good entrepreneur or business person will never lose focus on what’s important and where their priorities are. The weakness is when they get caught up in trivial perfectionism in the tasks which can and should be left to others. Entrepreneurs should learn to delegate tasks. The short-sightedness become obvious when DOING rather than BECOMING becomes an obsession.
Being busy does not mean being productive
9. WRONG EXPECTATIONS
Some startups were being sold the idea that all they need to do is get into business and the money starts rolling in without doing anything. Sometimes it is the person’s fault because they only hear what they want to hear or they think they know better. Bottom line, building a successful business is not a 60-yard dash but a marathon. If you don’t want to die in poverty or see your business collapse, then you must be diligent.
Do Not Expect What You Didn’t Work For
10. QUITTING TOO SOON
This is the biggest reason why many businesses fail. If you do not persevere, enquire, research, fail and try and try again, you might not be successful in business. First, you should know that any business done half way can never be a success. You must strive against all odds to make a business stand. Another problem that has close many businesses almost as soon as they start is inadequate funding or paucity of fund. Many entrepreneurs make the fatal mistake of commencing on business with inadequate operating funds. Such businesses don’t last as the initiators will easily be discouraged especially when there are big competitors.
I advice, before you start any business, have the mindset of I will do whatever (Positive) it will take to succeed, that alone is the beginning of your success. That mindset will help you broaden your business scope.
Try and Try and Try Again
There are other factors or reasons an entrepreneur might experience business failure but the above 10 from my years of experience in business are the major causes. If you can overcome the listed causes, you are not far from being a success in any chosen field in business.
As I wish you well in your business, it will be good if you share this article with you FAF using the social media buttons below, maybe they will learn a thing or two that can change there business or mindset towards business.
Note this quote from one of my mentors
“Success is a lousy teacher. It seduces smart people into thinking they can’t loose” ~ Bill Gates