The Working Experience: 6 Reasons Why Businesses Fail
Matty Kerr is co-creator with John Brancaccio of The Working Experience. Listen to our podcast on iTunes and Spotify and visit our website, theworkingexperience.com, for videos and merchandise.
Passion is great but it’s nothing without a plan, a solid foundation.
According to research performed by the Small Business Administration, only half of new businesses last for the first 5 years and only ⅓ of new businesses last for 10 years.
Based on research done by Bloomberg, Forbes reports that of every 10 new businesses 8 will fail after the first 18 months.
Here’s why:
- Leadership failure. Lack of management skills, ability to delegate, lack of vision. You cannot lead if you don’t have the vision. Why would anyone follow you?
2. Not standing out from other businesses. If other businesses are offering the same product you are, why should anyone deal with you? What makes you special? You need to find your business’ voice. (Geico, Allstate, Flo). Think about a customized approach to how you deal with the public. This is how you build your brand.
3. Not being in touch with customer needs. You need to listen to feedback from your customers. Maybe what you are offering isn’t what they need anymore. Maybe you need to up your game, your product etc. Do your market research. Be responsive and adapt.
4. Lack of a business model. How are you going to make money? You may have a great product but do not have a strategic plan to make it profitable. Or you may not have done your research and there is no revenue stream. You need a solid plan based on research.
5. Poor Financial Management. Many profitable businesses have failed due to poor financial management. You need to know down to the last dime how much money is coming in and where it is going. You also need a contingency plan if there is a financial crisis (ie. the pandemic). Someone needs to be in charge of paying the bills, th e taxes, balancing the books and needs to stay on top of that.
6. Too rapid growth and over expansion. Make sure you can manage your business. Do not count on one business or part of a business to pay for another. If you get in over your head and cannot service the demand, you will lose your customers. Don’t get overconfident and order and order too much inventory. Practice sustainable growth.
If you want your business to succeed, you need to do you research. You need to know your customers needs. You need to have an identifiable revenue stream. You need to stay on top of the money.
Be passionate, but be realistic.
