Small businesses are springing up here and there everyday. They are started by both those who know what it takes to run a successful business and those who are completely novice, without the wherewithal to take a trade to the next level.
Small businesses are actually contributing to boost the GDP of every nation and so they need to be encouraged. Government needs to help, financial institutions need to give the much assistance they can provide to those who are willing to venture into this sector.
Taking a look at the economically viable countries today, you will discover that the mainstay of their economies is from the pooling together of the income generated by both small and medium scale enterprises. Hence the small businesses must be seen as a relevant sector of every nation’s economic sustainability agenda.
Be that as it may, several small businesses are set up everyday, but they hardly stand the test of time. Several factors can be advanced for this not-too-encouraging trend. Why are they actually failing? Why should everyone not succeed in this seemingly easy-to-run sector of the economy? The following can contribute to the rate of failures experienced:
- Lack of Proper foundation: A house without foundation cannot stand the test of weather. So also is a business without proper foundation (be it small or big). Before going into a business you need to know what it takes to succeed there. You need to know what those who have succeeded there did to be successful. You need the basic facts – you need to make proper research and be fully prepared. But jumping into business without arming yourself with the facts would inevitably lead your small business failure.
- Lack of finance: Money is business. It is the soul of business growth. No matter how good your ideas are, if there is no finance to execute them, it is obvious that failure would be the next thing. Running a small business without the needed capital to equip it, pay rent, expand, etc. would spell a doom for that venture.
- Poor staffing: This problem is in different dimensions; either you are poorly staffed i.e. your staff strength is not enough to run the business as it begins to expand, or the staff you have are not well trained to handle your small business. Another problem could also be that the concept of your business is fully understood by your staff or that they are not fully committed to giving you their best.
- Poor branding: How would an average customer describe your business? Is it distinct from others around it? Does it have any unique service to offer? Does it have a special way of attending to customers? How are your products packaged? Do they look more attractive than the products of your competitors? If you have no distinguishable brand, it is likely going to lead to your small business failure.
- Lack of confidence: A man who does not believe he can succeed can hardly succeed. Your system act based on the messages it receives from the brain. So if you look at your competitors and give up hope, you are bound to fail in your small business pursuit.
- Lack of focus: Small business failure could also stem from lack of focus. For you to make it in life you must have a focus. This is true in all endeavours – business, education, career, etc. You know what you want your business to look like at a specific time, and remain focused as you pursue the realization of that vision. Whatever goal you have set out to achieve must be pursued vigorously without any form of distraction. When you lose your vision, you also lose your dream, and that would translate into failure.
- Poor public relations: No business man ever treats his customers shabbily and yet succeeds in his business. The way you treat your customers would determine how far you go. If you treat them like Kings and Queens, they would make you a business success. If you treat them like worthless objects, they would join heads to plot your failure.
- Running cost: When you do not control your running cost you are heading for a doom. If the cost of running your business far outweighs your generated revenues, sooner or later the business would fall.
- Borrowing to run your small business: Never run your small business on borrowed fund because it would not give you the chance to stand firm. Every small profit you make goes into servicing your debts. By the time you remove the money for debt service, maintenance, rent, etc. there would be little or nothing left for the business to continue.
- Too early diversification: Every business man wants to succeed, and then diversify to make more money. But doing it too early when your business is yet to find its feet could ruin your chances of success. If you diversify too early, the meager resources available would be shared into different portions to run the different areas you have ventured into. When this happens, each venture is poorly funded and eventually they all starve to death.
When you understand these causes of small business failure and avoid them, you are bound to make it in your area of trade. But failing to pay attention to them and going ahead to make the same mistakes would definitely lead to the fall of your business.