By Yhordan Serpentini | August 16, 2022
When starting a business, you must be aware of the potential risks and factors. Being an entrepreneur, and your own boss, sounds great on paper, but it is a completely different story when actually doing it. There are a lot of factors that most small business owners tend to overlook or underestimate, which most of the time will, unfortunately, result in business failure. Here are the 7 most common reasons why small businesses fail.
1. There Is No Business Plan
Starting with what sounds like one of the most obvious reasons is, of course, not having an actual business plan or having a poorly planned one. A business plan is a roadmap that documents the strategies you’ll use to achieve your business’s future objectives. It is the blueprint for how your business will set up goals, and reach said goals.
A business plan also takes into consideration other factors like customer base, target audience, product Unique Value Proposition (UVP), and cash flow projections. It isn’t something you can procrastinate, slack off on, or just not do at all. Without a plan, your company is subject to mismanagement, and it is left vulnerable to potential business failure.
2. There is No Synergy
One of the most important parts of being an entrepreneur is reaching your target group and target audience. You have to market yourself, as well as advertise your company, to the public in order to generate traffic and potential consumers. This is all part of the process called Integrated Marketing Communications (IMC).
IMC is crucial to a company’s growth and lifespan because it generates synergy; in other words, you build a relationship with your consumers to generate loyal customers. IMC includes things like brand identity, brand personality, public relations, social media, audience analytics, SEO, business principles, advertising, and other forms of marketing. If you want to create loyal customers, practice IMC and generate synergy.
3. Lack of Market Research
Before starting your company, you must always research the market you plan on serving and producing. You have to conduct excessive research about the market, its ongoing trends, what is generating the most leads and traffic, who will be your competitors, what makes your company different, your primary target group and audience, as well as what current national or international issues may affect your business.
4. A Lack of Funding
One of the worst things that can happen during the start-up phase of a small business is that there is either a lack of funding or no funding at all. Just like the market research and the business plan, there are a lot of things you must Keep track of before bringing your idea to life, including how you will be funding your business during the early stages.
This is where you would have to continue conducting excessive research, as well as create a spending plan for your company. Keep track of the available sources of capital, credit scores, lenders, ventures, investors, etc.
5. Lack of Marketing
Touching back up on the IMC process, you will not gain enough traction, leads, traffic, consumers, clients, etc., if you do not market your company, or you do not do it well enough. Advertising makes up only a quarter of integrated marketing, not the entirety. You must study your analytics constantly, make your website mobile-friendly, conduct search engine optimization, and know what your target audience will want before they even want it.
As unfavorable as it sounds, the majority of your profit will likely go into fees, upkeeping, and advertising. Make your company known, hire creative directors, build a budget plan strictly for advertising, or create a social media page that is actively engaging with your consumers. There are plenty of ways to market your business; don’t underestimate just how well it works.
6. Failure to Adapt
Something you must always keep in mind is how well can your company adapt, either to the trends of the market, a recession, unexpected inconveniences, global issues, national crises, a drop in popularity, etc. Always have a backup plan, because when it comes to business it is not a matter of “if” something bad will happen, but rather “when” will something bad happens.
7. Mismanagement
The biggest reason all businesses have likely failed will almost always point back to mismanagement. Hiring the wrong people, failure to retain consumers, poor economic choices, inventory mismanagement; no matter what the reason may be, it will always be due to the poor choices made in a company.
There are a few ways to combat mismanagement, such as having backup plans, making rational and educated decisions with your team, studying the data of your company very closely before making an economic decision, etc. Be engaged with your company, your clients, your consumers, your employees, and your investors.
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