How To Avoid Business Failure And Be Successful In Your Business
There are many reasons for business failures, and this post will help you identify ways to avoid business failure and have a successful business. There is hardly any entrepreneur or startup founder who will tell you that he/she never encountered failures.
One thing is clear in business, you either succeed, or you don’t. There is only one way to ensure your business is successful, and that is to avoid business failure. The fact that you are learning how to avoid business failure doesn’t guarantee you won’t experience at least once in your lifetime. The essence of this post is so that you understand that a failed business can be revitalized to be a great success.
Also read: How to structure your business for growth
The renowned Apple Company was going down the drain when they had to recall Steve Jobs for his second spell at the company. That singular act was all the company needed to get back on track. Great businesses have gone into bankruptcy and are never to come back. So, as an entrepreneur, one of the worst mistakes that you can make is to think and believe your business is failure-proof.
I would hate to break it to you, but no business is full proof, no matter who the CEO or founder is. Now that we are clear on the fact that no business is failure proof, just relax as I take you through the ways to avoid business failure. The U.S. Small Business Administration (SBA), one out of three new businesses, fails after the first two years. This is the more reason why you need to be very careful.
Tips On How You Can Avoid Business Failure
Develop a well-detailed and strong business plan
There is an indisputable saying which goes “he who fails to plan, plan to fail.” If you must avoid business failure as an entrepreneur, your business plan must be top-notch. There is no doubt about the fact that a strong business plan is essential for business success.
Your business plan details the path by which your company intends to bring in its revenues. You don’t jump into starting a business simply because there is available capital. If you do that, then you are setting yourself up to fail.
Manage Your Cash Flow Very Well
There are lots of business startups that struggle with cash flow issues. To avoid business failure, you need to devise a good and functional way to manage your cash flow. You must have a balance between getting cash into your business through sales and also covering the expenses. When your business experiences extended periods of negative cash flow, it will have the same effect a loss of blood flow would have on an individual.
A young and fragile startup company or business must do everything within its power to bring in revenues while also limiting expenses.
Avoid High And Unhealthy Debt
The lack of a good understanding of debt is one of the reasons why businesses fail. If you must avoid business failure, then there is the need for a good understanding of the fact that loans, credit cards, and other forms of debt can be a double-edged sword for small and young businesses.
The fact is that most companies depend on some level of credit to source the capital they need to launch. However, the downside of credit comes when the time to repay the loan arrives. If you spend most of your cash flow on repaying debt rather than expanding your customer base, it lacks the needed flexibility to compete favorably in the market.
Make Good And Realistic Projections
It is a well-known fact that many entrepreneurs are optimists by nature. However, that doesn’t mean that you should live in self-denial. It was Franklin D. Roosevelt who said, “it is only a foolish optimist that denies the dark realities of the moment.”
When making your projections, you must learn not to overestimate your potential revenue and underestimate your future costs. Any unrealistic projection can send your business down the drain, so you need to be very careful. You must take off the rose-colored glasses if you wish to make accurate projections for both revenues and costs. It is only by doing so that you can keep your business dream alive.
Don’t Underestimate The Competition
One of the many reasons for business failure is the poor judgment of the entrepreneur to underestimate the competition. In business, everyone is in it to win, and no one is there to watch, you take the market all for yourself. No matter how “small” a business startup is, don’t ever make the mistake of underestimating the team behind it.
Also read: How to improve business performance
For me, one of the major reasons why a business fails is the poor judgment of the leader (s) of that business. You might have an excellent product, but without a good marketing strategy, people will not know about your product and services. A competitor with an inferior product who has a well structured and functional marketing strategy can take your customers away from you. Without customers, you are not in business.
Ineffective Procedures And Systems
Starting your business without a sound system to support the business is like building castles in the air. Before venturing out to launch your business, you need to put a functional system in place for proper business management. All the great companies and businesses that you hear about today were built on effective and functional systems.
Without a system, your business cannot function outside your personal contribution. When you have a system in place, your absence will not cripple the business, as others will keep it running until you are back.
There are many ways that you can avoid business failure, but the major ones have been listed here for you. You can make use of the comment section to share your thoughts on the subject matter. Thank you