According to the Small Business Administration (SBA), a whopping 50 percent of small businesses don’t see past their fifth birthday. This is disheartening considering no one starts a business for it just to fail. But where do these businesses go wrong or rather what didn’t they do that they were supposed to?
There are a number of reasons that lead to a company’s failure within five years. Here are common reasons why many small businesses struggle to stay afloat.
Lack of communication with customers
Customers are the backbone of any business. If you choose to ignore your most valuable asset, your survival chances are literally zero. Assuming you know who your target market is, the next step is definitely opening a line communication. However, many startups go under because they fail to understand how to communicate with their customers effectively.
Small businesses must constantly communicate with customers. By doing so, you will be able to focus on what your customers need and want.
Social media and the company’s website for example, provide a great platform for businesses to interact with customers.
Failing to do a comprehensive research
Many small businesses fail because of poor or inadequate research and planning. You can’t just wake up one day and decide to start your own business. There are so many factors that you should consider first such as capital needed, workforce, location of the business, long &short term strategies, marketing needs or how to prepare for future uncertainties.
Failing to track the important numbers
Many people tend to concentrate too much on achieving their business goals and forget to track the numbers that really matter. If you fail to track how much money is coming and going out, your business might experience financial distress. And it’s only a matter of time before your business succumbs to these bad financial practices.
Growing too quickly
Too much of anything can potentially be dangerous. This also applies to businesses. Too much business growth too quickly can cause more harm than good. The rapid growth could not only drain your much-needed finances to stay afloat, but the business could also end up taking on too much debt.
Don’t rush to scale; slow and steady wins the growth race.
Having the wrong team
Having the wrong people can sabotage your business success. Unfortunately, you might not realize the wrong team is the recipe for your business misery. It may take you a while to figure this out and sometimes it might be just too late.
Before starting out, invest your time and money to find the right team for your business. Having the right people makes it even easier for owners to delegate tasks instead of going it alone (which sometimes isn’t always the smartest move).