7 Obstacles to a Successful Business
7 Obstacles to a Successful Business
The failure rate of businesses over 10 years is 60 percent, going as high as 96 percent. Contrary to popular belief, it is not the rise and fall of our economy that causes a company to fail. Most of the reasons a company shuts down can be attributed to these factors.
One out of every four businesses that closes during a disaster never reopens. A disaster can be as widespread as a hurricane or earthquake or as local as the illness or death of a key staff member. One way of avoiding this potential cause of failure is to have a sustainability plan which includes offsite backups and policies and procedures for continuing operations during times of crisis. Make sure that your plan is developed by several people with different viewpoints of the company.
Poor Managerial Skills
Your business is only as good as its staff. They are your most important asset. The skills that they bring to the table are a key source of the company’s success. Conversely, what your employees lack, your business will lack. Small-business failure is directly linked to the lack of managerial skills in senior staff. The fix is straightforward, if not simple. Hire people who are well educated in management. Alternately, offer incentives for going back to school and earning a degree.
Advertising is one of the most significant components of a successful business. Its omission can lead to business collapse. Unfortunately, marketing can be a pricey line item in a budget and, when things get tight, can be the first to be forgotten. This leads to a decline in sales, which compounds the situation, making it the first step to a rapid failure. To make the best of your marketing budget, use social media marketing for the greatest penetration.
A Lack of Financial Records
An income statement, balance sheet, statement of cash flow and statement of equity make up a complete financial statement. This is the most reliable piece of information that a business owner will use to make business decisions. Many small companies do not take the time to create these documents on a regular basis. Instead, the management is surprised at the end of the tax year but, by then, it is too late to make changes. Create financial statements quarterly or more often for companies with a lot of financial fluctuation.
Too Slow to Respond
A small-business owner is half manager and half psychic. You always need one eye looking into the future. Use marketing measurements, financial statements, and surveys to test the ground before you and respond to changes rapidly. Adopt the motto, “Hope for the best, but plan for the worst.”
Dropping the Ball During Transitions
Most small businesses have a family component. It is part of maintaining a healthy work-life balance when you are an entrepreneur. As family members mature, they transition into new roles. People tend to focus too much on the mechanics of the transition, concentrating on the paperwork aspects. It is the relationship component that makes a great transition of job functions.
Giving Up Too Soon
The statistics on failure may seem grim but the truth is that two-thirds of businesses that close are actually successful. Know that your business will transform as you do. It may close but the funds will be used to open a new business that better suits your new circumstances.
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