Thursday 16th May 2019
Every hour in the UK, there are roughly 70 new businesses registered, of which half of those fail within the first 5 years. Running a business can be a daunting, draining task that requires commitment, perseverance, and great management skills – a task that not everyone is up for.
When executed properly, business owners can prosper in rewards of their success. However, with uncertainty ahead for entrepreneurs looking to set up shop, we’ve taken a look at some of the most common reasons new businesses fail and how they can be avoided.
Crunching numbers isn’t everyone’s cup of tea, but it’s a vital task in keeping your business afloat – a recent study found that 29% of start-up failures were due to running out of cash. Ensure you have a plan in place that ties up unpaid invoices, employee salaries and business expenditures so that you’re always on top of your outgoings and incomes. Not enough cash is one of the most common reasons for businesses going under which means it’s vital you get this right sooner rather than later as even the most successful companies from SME’s to giant incorporations can fail from lack of cash.
Lack of research
Whether there’s a gap in the market or a new invention, it’s vital to research into both your business market and your future customers. It’s easy to assume that you know everything about your business market, but that’s often where SME’s fail.
Collect more information than you need so that you can be prepared for all situations. Find out where they shop, what are their habits? What are their business needs? How often do they go on holiday? Do they like spending money on that? Learn and absorb as much as you can so that you can create a solid marketing strategy that makes the consumer journey a breeze and minimise any unexpected setbacks.
Ask for help
Although it may seem like an easy thing to do, many business owners don’t seek help or support. You don’t only need help when you’re in trouble – having a mentor or expert to guide you through the stages of setting up a business can be paramount for success. This could be intelligence on finance, security, data, leadership, hiring or marketing; whatever skills you lack or don’t have time to execute is the perfect opportunity to learn from someone else.
Many business owners think management comes naturally, and to some it does, but for most companies, this can make or break you. Leadership is important for both business income and employee retention, as well as knowledge sharing, hiring and acquisition. Delegation can ensure that the right people are doing the right job in order to propel the business in its goal direction.
The wrong team
Hiring employees can be one of the toughest decisions a business owner can make. It’s hard from an initial meeting to understand the true value of a person and whether they’ll be the right fit for a team. Having a diverse set of skills that add to the value and service of your business is vital and a key USP. However, not all employees are right for your business all the time. Some outgrow the business, and some don’t perform as well as they should. It’s important to recognise when to let go of people as paying salaries that aren’t giving your business a good return can drastically reduce your cashflow for no benefit.
Whilst some businesses grind to a half quickly, others take years to slow down before realising that it’s not working. Though each business is different, there are common mistakes business owners make that have detrimental effects on their company. We’d advise taking action on the above points to plan a more successful future for your company.