Business failure is often a harsh fact. While 80 percent of all companies with employees will make it through their first year, the success rate starts to drop off significantly in the following year. Only about half of all companies with employees ever can survive their second full year. For many businesses, this is a bitter reality that they must deal with. However, there are a number of possible explanations for the demise of a business.
One of the most common reasons why businesses fail is a simple blunder. A single mistake may be the beginning of the end for a business. Unfortunately, a lot of business owners don’t pay enough attention to details. They may not realize that a small but important detail can spell disaster for their company. A business owner should never overlook a small detail.
Poor Management: Another major reason why small businesses fail is poor management. Many businesses make the fatal mistake of treating their employees like they are an inferior resource. Because of poor management, employees may feel like they are just another resource used by the business to maximize profits. This can lead to poor leadership and ultimately, failure.
Failure to Select the Right Team: Another reason why so many small businesses fail is because the owners and/or the managers of the business fail to select the right team. Some startups select the wrong team, either because they are inexperienced or because they do not have the right skills. In both cases, a startup may find itself in big trouble.
Bad Business Plan: Finally, a failure to develop a good business plan is often a very big mistake. Few businesses get off on the right foot with a good business plan. Even those that do manage to get started often find themselves in big trouble later. Good plans always help a business owner avoid major mistakes and help it grow into the future.
These are some of the most common reasons why business owners fail. While most businesses make mistakes along the way, these are just two of the biggest reasons why so many fail. A business plan is essential if you want to get started and make it survive. If you are serious about starting your own business, don’t take chances – develop a good business plan today.
One final reason why so many fail is because they fail to communicate the important information necessary to avoid bankruptcy. Most businesses are extremely difficult to run and fail because one of the key elements of their operation – marketing – is not understood by the owners or managers. Marketing failure is the third-most common reason for bankruptcy. Marketing failure means that a business fails to attract customers and retain those customers. If this happens to a business, it usually means that the company will be forced into bankruptcy.
In conclusion, almost every entrepreneur makes mistakes. The key, however, is being able to learn from those mistakes and not repeat them. Every entrepreneur makes money in some manner, even when they fail within the first year. Successful businesses all share one common trait – they continually look for new ways to increase their revenues while cutting expenses, expand, and grow their business. Every entrepreneur succeeds because he or she took action, learned from his or her failures, and took action to duplicate the success.