It’s a common fact that it isn’t easy to start a business and there are many reasons why our business could eventually fail. Many businesses died prematurely. Although it is an unfortunate fact, this gives us an opportunity to dissect it and gain some valuable lessons. It is important to know what businesses die and this should help us to stave off the same curse before it brings our business down. One critical disease that affects ailing businesses is bad management. It is a dangerous illness that can cause eventual deaths for many businesses. Bad management could be caused by poor or non-existing business plan.
It is also likely because business owners simply have no business of being in the industry itself. This could be caused by lack of thorough understanding or adequate knowledge on business operation. As an example, it is a bad idea for people who have shoes stores to start a software development company. They are not qualified to choose a vastly different business category and this will cause them to make poor decisions. Business owners shouldn’t be in denial regarding both their competence and incompetence. Actually, successful businesspeople know how to understand and address shortcomings.
Bad financial planning is another disease that could cause the death of a business. Businesses are essentially all about money and poor cash flow and financial management could contribute to the death of our business. Business owners could miscalculate costs of running and doing business. They don’t take into account things that are needed to set specific prices. In this case, it is important to have proper financial resources and backup when we start a business. Despite our flawless planning, it is actually possible that the market behaves differently due to global changes. In this case, we will have a financial margin that can absorb the unexpected financial impact.
Bad marketing is another disease that can kill our business. Even the greatest product and service in the world won’t matter much if our marketing effort is ineffective or inadequate. With bad marketing, much of our wonderful products will sit in the warehouse, instead of customers’ hands. Many misguided business owners who have excellent technical skills when it comes to developing products tend to underestimate the importance of proper marketing. They may underestimate the competition and use the old, less effective marketing methods.
Another big mistake is relying only on a single or a couple of huge clients. It should be understood that no business relationship would last forever. However, we shouldn’t disregard other factors that could cause the death of a business. There are some external factors that could cause many businesses to die, such as new restrictive government regulation, down global economy, lack of qualified employees, natural disasters, fire and bad business partners. In many cases, there is little we can do to deal with external threats except to adjust and adapt. We should imagine worst-case scenario and look for ways to compensate.