There have been stats thrown around for years regarding the failure rate of new businesses, some as scary as 95% of small businesses fail within the first 5 years. Regardless of the exact numbers, we all know the dangers of starting a new business and wish we could minimize these risks.
Well, we’ve put together a list of the top 3 reasons new businesses fail and how business owners can avoid them.
- Leadership: Leading an entire organization is very difficult, especially if it is brand new and still finding its way. Poor leadership skills or undeveloped managing abilities can quickly become apparent to those around you when it comes to decision making, supervising staff, and having a clear vision for the future of the organization.The Fix: Many say leaders are born, not made – but that is not always the case. Study, take classes, find a mentor, and reach out to great leaders you know for insight. The deeper you dive into the leadership pool, the longer you will survive.
- Finances: A company’s finances are one of the key building blocks for a successful business, and also one of the most stressful aspects of starting and running a business. Tracking where every dime is coming from and where it is going is a must for new businesses, as financing is hard to come by and 60% of small businesses either break even or lose money.The Fix: Cash flow is the most important thing you can focus on. Having a solid starting point is key – professional accounting software is a great first step which leads to profit and loss statements showing where you are making and losing money. Not the most financially savvy business owner? Hiring a professional bookkeeper or accountant will be a great investment in the long run.\
- Future: Many new business owners try to predict the future – whether it be their own business, the market, customers, etc. Anticipating business shifts is great, but often times regular (and necessary) business activities are overlooked as owners try to get ahead of the future they have in mind.The Fix: Instead of trying to predict the future, just start by planning for it. Pay down your debt, collect invoices, expand your customer base, introduce new products/services the market needs, and never stop innovating. Owners are always surprised by how things can just fall into place when they focus on the daily businesses tasks. There is always planning and thinking ahead to the future, but that should simply be in the back of your mind as you go throughout your day instead of your main concern.
Want more information on how to make your business successful? Check out our post on how to grow your business in 2015.