4 Top Reasons Small Businesses Fail

4 Top Reasons Small Businesses Fail

Starting a business, every business owner wants to succeed, but most small businesses often fail at the infancy stage. Unfortunately, statistics show that the numbers of young companies that are going out of business are growing by the day. The failure, unfortunately, cuts across the board from manufacturing, retail to construction. The reasons these small businesses fail are numerous. However, we are going to explore four of the main ones.

1. Insufficient capital

Capital has been cited as the number one reason small businesses do not succeed. Most governments have realized this cause and have started the government grants for small businesses as an initiative to try save businesses. Lucky entrepreneurs who qualify for the grant stand better chances of succeeding than those who do not receive any. Other institutions such as banks have also come up with incentives to offer loans and other financial instruments to support the small growing businesses. Lack of cash flow management skills has also been cited as a financial challenge. For instance, a starting entrepreneur can take a loan and fail how to effectively allocate it to aid the business needs.

2. Poor planning

More often than not, small business owners are caught up in their financial freedom dream that they fail to invest in skills that are necessary to run a business. Failure to plan accordingly is detrimental; it is often said that failure to plan is planning to fail. A business plan is important when starting a business; unfortunately, very few budding business owners create one. In addition, they just get into business with enthusiasm that they fail to do proper market research that would enable them to draft strategies to deal with competition.

3. Wrong Reasons

Starting a business should be about passion or filling in a market gap. However, most people get to business for all the wrong reasons. Some will get to business so as not to report to a manager. Failure will come when they realize they lack the acumen to run a business successfully despite having the right skills. It is important to first understand the reason you want to start your small business; the fact that you dislike your boss will not cut it. Soon the enthusiasm will fade away, and you will have a failing business.

4. Poor marketing

Starting a business is not enough; you need to let your clients know that you exist. You need to understand what it is you are selling and come up with effective marketing strategies. Most people will fail to know where to meet their clients; for instance, if your potential clients spend most of their time on social media sites then that is where you need to advertise. Create a working marketing strategy and stick to it. Marketing is not an expense; it is an investment, so invest.

Doug

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