Why Businesses Fail
Create and get a company is not an easy task. It is alleged that, on average, 70% of them fail before they are three years, and that only 10% are over 5 years successfully.
Here we present the 5 main reasons why companies often fail, as well as some tips on how we can meet each of these reasons:
1. Lack of experience
Creating and managing a business is not easy, is not something you learn from the overnight, but it is something that is learned over time. Learn how to create and manage a business requires theory, but above all, a lot of practice.
The lack of experience often results in overly optimistic, unrealistic projections in hasty decisions in inefficient management, etc.
The experience acquired over time, simply by creating and managing businesses. If you do not have much experience, it is recommended to start slowly, beginning with a small business, taking some risk, and making decisions without fear of making mistakes or failing, knowing that mistakes and failure is where one learns more .
2. Lack of capital
Another reason why businesses fail is lack of capital. Problem arises when you have not prepared a good budget expenditures, do not get the expected sales or the company grows too quickly and there is not enough money to be overwhelmed.
To address this problem, before starting a company, the first thing to do is develop a good business plan that allows us to make a good projection of both the expenditure and revenue, which, in turn, allows us to calculate what the capital requirements necessary to implement the business and to operate during the first months of life.
Another way to address this problem of lack of capital, is to seek to minimize investment (for example, by comparing While prices of inputs and equipment, choosing rather to suppliers, etc.), But without sacrificing quality.
3. Low sales
An obvious and common reason why businesses often fail is the low level of sales that come to get.
The reasons for low sales obtained may be several, perhaps they chose a bad location, not segmented the market properly, does not offer a quality product, it provides a good customer service.
The main ways to combat the problem of low sales are to provide a good quality product, provide good customer service, perform sales promotion, and increase advertising.
4. Poor location
A bad choice in the location of a business is another common reasons that companies often fail.
The location of a business is an important aspect that we must take into account if we want to avoid premature failure, however, succeed.
When choosing the location of the premises of our company, we take our time, find good alternatives, and choose carefully, taking into account such factors as our target audience, competition, crowd, costs, accessibility, visibility, etc.
5. Excessive competition
And finally, another major reason why businesses often fail is excessive competition.
Often created a company that does not have much competition initially, but soon, especially if the company begins to succeed, new entrants are beginning to emerge that will make every effort to take away their market share.
The main ways to deal with the competition are to provide a good quality product, a unique, original, innovative and different, and on providing excellent customer service or.
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