How to avoid business failure in 7 steps
Yes, success is the primary goal when you start a business. Because of course it is. But let’s be real – business failure is an unfortunate outcome that could happen to any entrepreneur.
Business failure can stem from a number of factors: a poor business plan, inadequate cashflow, lax financial management, bad debts or an unpopular product or service.
Not all roots of business failure can be controlled by an otherwise successful small business, but there are certainly savvy measures that can be put in place to mitigate the risk of your business failing.
1) Vet your staff thoroughly
One of the primary steps to running a business that’s success and avoiding failure is the quality and trustworthiness of your employees.
You’re only as good as your people and your people can potentially make or break a business. Laziness, lack of attention, being untrustworthy or incompetent will derail your business toot sweet.
Be thorough in your hiring process and keep a close eye on employee reviews, performance and drive. If you want some tips on employee motivation, read our blog here.
2) Not understanding your customer
Do you actually know what the market wants or are you fooling yourself?
A common cause of business failure is actually the failure to understand what a market wants and supplying services or products that are off the mark, too expensive or generate little desire.
Remaining agile, querying the market and truly getting inside a customer’s head is a must. Pull back quickly on offerings that aren’t on the pulse.
3) Substandard procedures and systems
Inefficiency and poor management are a killer and will cause you to lose money. If you’re swapping between two, three or four programs to do a simple job that could be solved by one, you’re playing into the hands of inefficiency.
Day-to-day you may think one task can be done that way, but it leads to a mentality of time wasting. Every task is important as it feeds into a whole.
Always interrogate whether there’s a better way, with better solutions and more efficient processes. There almost always is.
4) Not consulting an advisor
If you have a passion, a skill or a brilliant idea, you have a good basis for a successful business.
The other side of the coin is sound financial management, business planning, forecasting, cash flow and tax compliance.
There’s every chance this isn’t your strong suit as a business owner. Even if it is, you could sure use a professional second opinion on your business model.
Not receiving advice from accountants, bookkeepers and business advisors is a major misstep that can potentially lead to business failure.
Are you stuck on a business idea or business plan that is no longer feasible? Holding the line, when every signal is telling you to move, is a common issue of small business management.
Inertia is a powerful force and it requires an agile state of mind to combat. Now more than ever, the ability for a business to chase success by shifting direction, jettisoning underperforming revenue streams and chasing new opportunities and identities is crucial to avoiding business failure.
The world isn’t static, so why is your business? Check out some tips on business agility here.
6) Lack of vision and planning
Do you have a genuine vision for where you want to be in five years? Do you have actionable KPIs, metrics and goals to help you get there? What about a long-term marketing plan?
Vagueness will not achieve business success. You need to have a map of your business’ future (albeit a flexible one to account for market shifts) and, importantly, clear and identifiable ways of measuring your progress.
It’s easy to roll along, year by year, but ‘business as usual’ doesn’t breed success, it risks failure. Successful companies always have a vision for the future.
7) Underestimating the competition
Remaining complacent is a massive barrier to business success. Keep a keen eye on your competition at all times, as well as your own original research.
New, hungry businesses enter the market all the time and old players shift their game unexpectantly.
This doesn’t mean you have to follow suit (although it can), but also that you should be looking at chinks in their armour, taking the next step they may have missed or recognising a great value offering you need to combat.
It’s prudent to make ‘competition spying’ a routine part of your business strategy to avoid becoming second fiddle and risking business failure.