As per one of the survey report, about 6.5 million businesses launch every year. But only a handful of them sustains themselves in the dynamic competitive market.
As we all are aware that every business venture carries some level of risk. And only a handful of businesses manage the risks effectively & sustain them for a long term period. This is expelled by one of the surveys & below is the result.
These numbers are very much upsetting for small business. Even the current situation covid-19 the global pandemic gives additional worry to small business survival.
Why do small businesses fail? No one knows fundamentals shortcomings in Busines while starting of business. But if you want your business to succeed, you need to know and avoid these 4 common reasons why businesses fail.
1. Financing Hurdles
A primary reason why small businesses fail is a lack of working capital. In most a business owner aware that how much money is needed to keep while operations, running day-to-day expenses, payrolls, paying fixed and variable overhead expenses, such as rent and utilities & vendors payments.
When business faced fundamentals shortcomings, often owners failed to tuned with revenues, expenses, overhead payments, payrolls & vendor payments. Due to funding shortfalls a small business out of operation.
2 Pricing of the product & services.
A second reason is business owners fails to decide the correct products and services.to beat out the competition in highly saturated industries. Business owners intentionally lower the price of a product or service to entice new customers. While the strategy is successful in some cases, but many more times businesses close down because product & service was unable to retain the customer base. When the costs of production, marketing, and delivery outweigh the revenue generated from new sales, small businesses have to close down.
3. Lack of Planning
It is very much crucial for all businesses to have a business plan. Many small businesses fail because of unplanned fundamental shortcomings in their business. Planning must be realistic &accurate based on,
• Business, vision & Goals.
• Potential problems and solution
• Market analysis related to product & services.
• Workforce Requirements
• Competitive analysis
• Marketing, advertising, and promotional activities
• Budgeting and managing company growth
4. Market Analysis.
Most of the business ideas are fails due to non-availability or less demand of what you sell. In a market-specific group of customers are available for every category of items & they will purchase the product with available pennies.
To avoid business failure after startup, business owners need to keep close eyes on their market demand and customers’ needs on ongoing requirements.
Statistics on Causes of Failure
CB Insights analysis of 101 startups polls on why small businesses failed, according to their founders. Here is the top results:
Conclusion:
if you want your business to succeed, you need to understand and analyse the above 4 common reasons why businesses fail.
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