In part 1 of this series I talked about the four key ingredients that a successful business must have. This week let’s look at two more areas that the experts say can cause a business to fail.
2. Poor Management
Numerous reports on business failures cite poor management as the number one reason for failure. New business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees. Unless they recognize what they don’t do well, and seek help, business owners may soon face disaster. They must also be educated and alert to fraud, and put into place measures to avoid it.
Neglect of a business can also be its downfall. Care must be taken to regularly study, organize, plan, and control all activities of its operations. This includes the continuing study of market research and customer data, an area that may be more prone to disregard once a business has been established.
3. Insufficient Capital
A common fatal mistake for many failed businesses is having insufficient operating funds. Business owners underestimate how much money is needed and they are forced to close before they even have had a fair chance to succeed. They also may have an unrealistic expectation of incoming revenues from sales.
It is imperative to ascertain how much money your business will require; not only the costs of starting, but also the costs of staying in business. It is important to take into consideration that many businesses take a year or two to get going. This means you will need sufficient funds to cover all costs until sales can eventually pay for these costs.
Check back next week for the final success strategy in this series.