The excitement and risk associated with starting up a business make it a fulfilling experience. Bootstrapping a business is one of the most challenging things one can do in his lifetime. One of the biggest reasons for small businesses to fail is lack of sufficient planning. As someone rightly said, if you fail to plan, you are planning to fail. Relying solely on emotions and going ahead makes the business owners vulnerable to failure. The primary reason behind this could be the success & glamourous stories popping out in the media about a few startups which have achieved success out of a large pool of businesses that have vanished during the same period.
The statistics draw a grim picture – About 20% of businesses fail in the first year. About half of the businesses fail within five years. By the tenth year, only around 33% survive. This scenario gets even worse when faced with unprecedented events like corona virus-related impediments.
Yet, the above facts do not stop people from starting a new business and strive for its success. A little bit of careful planning and understanding the market dynamics can change the game for a small business. Let us look at the top reasons responsible for a small business failure
1. No proper marketing plan – Every business needs a marketing plan. In this digital world, if you are not ready with an effective marketing plan, your business will be lost in the ocean of products and services. Each business gets saturated with the number of users at a point in time. Then comes a marketing plan which will help business garner new customer eyeballs and engagements. Unfortunately, not everyone is an expert in that, hence you require assistance.
2. Wrong pricing - Many a time, the product is fairly good however the selling cost is too high. This makes the product unviable for the consumers in the current market scenario. Competition is very quick to catch this flaw and they would respond accordingly in the price-sensitive market.
3. Financial mismanagement – In my opinion, cash flow management is as important as generating sales for a new business. Sales are bringing money into the system while cash flow management means safeguarding that money and putting it into effective business growth purposes without wasting a penny. As someone correctly said, money saved is money earned. Most businesses fail to understand this and forget to check this important aspect. And mind my words, it’s a daily task without fail.
4. Not able to understand the customer behavior – Customer is the king. Someone rightly said. And this cannot be truer in our digital world today. Customers today expect the same level of services from small businesses like multinational corporations for example all types of payment options should be available to customers while shopping, they are not ready to compromise on this aspect. If you are unable to offer this facility, expect your customers to advertise this on social media. The tools that have empowered the customers in this fast online world are Digital Customer survey, Google reviews, Social media platforms like Facebook, Twitter, Instagram, Pinterest, etc. The bad reviews catch like wildfire in this amplified digital world.
5. Fail to collect and analyze data – As a small business, you are competing with big corporations on all fronts. Data is one such tool that makes them more precise in defining its customers. In this digital world, data is the new fuel for businesses across industries. With little resources, you have limited space to make data work for you, but collect as much information as possible during your day to day operations. Without data, it is like you are maneuvering a ship that does not have a rudder.
Let is summarize key takeaways:
It is a fact, some small businesses will fail. But fear of failure mustn’t stop you from pursuing your plan of starting your dream business. In these challenging times, like a worldwide pandemic, there is some opportunity to succeed.
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