Many businesses never make it to the 5-year mark. Why? Mostly it’s due to cash flow problems. But, that’s the wide-lens view of the problem. Here’s how to get granular and keep your business from crashing and burning before your eyes.
You Start It For The Wrong Reasons
Some businesses get off the ground, but they’re started for the wrong reasons. This can mean they’re not well-suited to the person starting the business. Would the sole reason you want to start a business be that you want to make a lot of money?
While that’s noble goal, it shouldn’t be the only reason. Why? Because you’ll quickly run out of passion and end up not doing a great job for your customers.
Many business owners who go into business with this mentality end up getting out a few years later in frustration — not having made their millions. Or, they end up contacting a bankruptcy attorneybecause they lost everything trying a complex money-grab.
If you start your business with the intent on pleasing customers and solving a problem they have, then the money naturally flows through to you. If you’re physically and mentally fit, then you may survive.
It all comes down to willpower.
Bad Management
Many reports on why businesses fail read the same: the business fails because of poor management. New business owners usually lack relevant business and management expertise in areas like finance, purchasing, selling, production, and hiring. They don’t know how to manage employees. And, unless they recognize what they do and do not know, they’ll face certain doom.
Neglect of a business can also be its own downfall. You need to be careful about studying, organizing, and controlling all activities and operations. This naturally includes studying your market, doing your research, and properly using customer data.
A successful manager is also one that creates a great work climate and encourages a positive culture to flourish in the business. He or she hires talent, and is skilled at hiring competent people, training them, and knows how to delegate.
Finally, a good leader is someone who is good at strategic thinking, is able to make a vision a reality, and knows how to envision his or her business years down the road.
Not Enough Money
This is the major reason why businesses fail. A fatal mistake many owners make is not having sufficient operating capital. They end up treading water with business loans, underestimating how much is needed. They’re forced to close before they’ve even had a fair chance to succeed.
They might also have unrealistic expectations about incoming revenues.
It’s important to know how much money your company requires, not just because the costs of starting it are high, but you need to know how those ongoing costs impact future revenues and profits.
Location Is Everything
For a retail location, location is everything. That’s because foot traffic can make or break a young business. Most companies don’t survive because they can’t generate sufficient revenues.
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