How to Avoid Failing in Business

Why do some businesses succeed while others fail?  Some people attribute luck to success in business but in reality there are common mistakes that hinder many small businesses before they even get off and running.  If you want to make a go of your business, try avoiding these startup missteps.

Many experts say their number one concern that leads to business failure is growing too fast.  “While growth is desirable, overexpansion is a serious error.”  Try and set realistic goals that you can meet or exceed in order to stay solvent.  Wanting to be the first in the market with a new product or taking on added overhead can cause your business to fail.

Mistaking a business for a hobby is another example.  Just because you love to do something and are passionate about it doesn’t mean it will make a sound business.  Before starting any new venture, research your business ideas to make sure they’re viable.  Too often businesses fail because owners feel their passions are shared by others and they won’t be able to carve out a specific niche in the market or that their ideas aren’t strong enough compared to the competition.

Poor planning.  Are you prepared to handle problems when they arise?  You need a sound business plan in place whether it’s five pages or 50 pages in length.  “Your business plan helps you to focus on your goals and your vision, as well as setting out plans to accomplishing them.  And don’t get mellow – revisit and revise your business plan annually.”  A business plan is where you work out crucial elements your business must have to thrive – finances, marketing, management and strategy.  You must think about the vision for your business and always, what your budget will look like.

Lack of funding.  Many young businesses are not prepared for the monetary restrictions of their businesses.  “Many budding enterprises fail to secure enough operating funds to get off the ground of make it through the crucial first few months.”  It’s easy to underestimate the capital required for all your business needs such as inventory, staffing, office space, vendors, etc.  Always, calculate your potential startup and operating costs.

Overspending and lack of capital reserves.  It’s true that many new entrepreneurs burn through their startup capital before they see positive cash flow.  Many young business owners have misconceptions about how business operates.  You should always prepare for unexpected increases in the costs of your operations.  Make sure you have enough reserve cash to help you through the tough times.

Wrong location.  Don’t be fooled by cheap leases that will put you out of a thriving neighborhood where your business is likely to see more traffic.  Consider locating near your competition.  Think about accessibility of store location to your customers.  Is the area well served by public transportation and foot traffic?  Be convenient to your customers.  This can make or break your success.

Failing to change with the times.  You must be flexible and adapt to changing market trends.  The ability to recognize new opportunities as they arise is key.  “Learn how to wear multiple hats, respond nimbly and develop new areas of expertise.”

Underestimating the competition.  You have to earn customer loyalty; it doesn’t just happen overnight.  Watch your competition closely and stay one step ahead of them.  If you underestimate your competition, you’re setting yourself up for failure.  Always keep a competitive analysis of your competition especially if you find yourself in a niche market.  Stay updated on changes in competitive behavior and strategy.  “With a comprehensive understanding of who you’re up against, you’re better positioned to come up with a good idea before they do.”  Customers go where they can find the best products and services.  What makes your product unique and better?  Think about how you can better service your customer and what they want and need.

Ineffective marketing.  “If customers don’t know who you are or even that your business exists, what hope is there to succeed?”  Successful entrepreneurs understand the effective power of marketing and advertising.  It doesn’t cost a lot to do some online advertising or use social media or email listserves to get your name out there.  Successful business owners know who their target audience is and which marketing channels will most effectively reach them.

Hiring the wrong people.  Your business will never succeed without employees who share your vision and are motivated and work hard to satisfy customer demand.  Hiring the right people can be time consuming but it’s worth it as it takes less time and effort in the long run if you don’t have to fire and rehire.  You need employees you can trust to do the job without needing to be micromanaged.

Procrastination and poor time management.  Putting off tasks that you don’t enjoy will sink your business faster than anything else. You can’t afford to waste time on unimportant tasks while critical tasks pile up. All tasks need to be done; if you don’t like to do them (or don’t want to spend your time doing them), hire someone to do them for you. If your time management and prioritizing skills are rusty, hire a small business coach or take a class to help you.

Entrepreneurial burnout.  Owning your own business can be time consuming.  Often you can lose sight of what matters most in your life, such as family and friends.  It’s easy to become consumed by your work and make it the main priority of your life but it shouldn’t be.  Take some time off and maintain a healthy work-life balance.

Putting all your eggs in one basket.  Try some variety in your product offerings.  While one idea might have gotten you off the ground, always think about expanding upon that original idea and branching out into new arenas.  Obviously, you don’t want to spread yourself too thin or lose sight of your original goal, but don’t stand still and stagnate.

Lack of experience in running a business or in the industry you’re entering.  There are so many hats you have to wear, from marketing and selling in order to run a business effectively.  On top of that, you have to understand your industry, the skills required to offer your products and services and the trends in the industry.  “If you don’t know about these basic skills, educate yourself.  Talk to others who are successfully running their own businesses, talk to industry leaders, get a book, find a website, get a coach, do your homework.  And keep increasing your business and industry skills by attending classes or reading new books every year.”

What I’ve discussed here today are some pitfalls to avoid so that your business can succeed through the good and bad times.  Take my advice to heart and try to steer clear of bad habits or patterns of behavior that may eventually be the downfall of your business.

Here are some articles you might want to check out about how to keep your business from failing:

“Why Small Businesses Fail”: http://networkingexchangeblog.att.com/small-business/why-small-businesses-fail/

“The Seven Pitfalls of Business Failure and How to Avoid Them”: http://www.businessknowhow.com/startup/business-failure.htm

“The Top 10 Reasons Small Businesses Fail”: http://boss.blogs.nytimes.com/2011/01/05/top-10-reasons-small-businesses-fail/

“Why Small Businesses Fail to Grow”: http://boss.blogs.nytimes.com/2012/04/10/why-small-businesses-fail-to-grow/

Until next time…