What’s Killing Your Business?
Sometimes our failure is out of our control. Perhaps it was written in the stars, predetermined by the unknown forces that control the world.
Other times, failure can be avoided through our own volition. All that’s needed is a little foresight, which as in the case for many of us, comes a little too late to be actually helpful.
There’s nothing that can instill a harsh lesson like making a mistake. Mistakes grant us the gift of hindsight, but preparation and planning can ease the pain of our mistakes just enough to appreciate them.
So, how can businesses owners prepare for potential failure? They need to understand the causes of failure. The better entrepreneurs are informed of all risks involved in their business, they better they can manage those risks.
It’s a sad truth that most businesses fail within the first five years of being started. Running a business is about balancing risks, and entrepreneurs must become skilled risk jugglers to make it in this volatile world.
What are the fundamentals of failure in most businesses?
Money
Money makes the world go round.
The saying ‘you need to spend money to make money’ is famous for a reason: it’s true. In addition to the costs of daily operation once a business is underway, they also need substantial initial launch money to kick off before they can start making profits.
This money needs to come from somewhere. The inability to secure investors or a loan can be the first killer of a business that hasn’t even started yet.
Even if they’ve managed to collect sufficient startup funds, a doomed business underestimates how much time it takes to make a profit, and doesn’t manage their finances accordingly. They overhire employees and then become burdened by labour costs. They put too much faith in demand for their product and over-order inventory. They prematurely expand without substantive proof they can handle it.
Businesses that overspend too early on are heading down a one way street towards failure.
No business plan
Starting a business without a business plan is like walking down a busy street blindfolded. You can be sure to trip and stumble along the way.
A business plan, at its most basic, is a roadmap of business goals and how to get there. These days, it doesn’t have to be a dense novel-length manifesto. It can be a few simple, bullet-pointed pages.
As long as it encompasses projections, financial considerations, strategy and tactics, and ultimate goals, your business plan can be as short or long as you’d like it to be. Sounds intimidating? Good. Starting a business is not easy. There’s nothing like sitting down to write a business plan to make you very aware of that fact.
When you’ve got a business plan, even if things don’t exactly go as you’ve planned, you still have a foundational vision of your business. You gain better understanding of the logistical elements of running a business, so it doesn’t take you by surprise later on.
Running a business is unpredictable. There are too many factors that could spell failure for you to be prepared for. Anything from a crash in the market to a natural disaster could sink your business. But that doesn’t mean you shouldn’t be prepared.
A business plan also forces you to think competitively. Competition is inevitable in today’s capitalist world, and to survive, a business must always have their competitors in mind. A business plan will force you to answer the whos, whats, whens, wheres, and whys so that you can compete in the market.
Poor leadership
Entrepreneurs tend to live in a bubble when it comes to their business. It can be a hard truth to realize that you can be the cause of your businesses failure.
Yet poor leadership can lead to the demise of a company. Business owners can get so carried away with the logistics of running a business that they forget they are also leaders, and need to carry themselves as such.
It can be difficult to find the perfect leadership style while simultaneously growing a business. Being an entrepreneur doesn’t automatically transform one into a good leader. It takes work and time to cultivate leadership skills, but it can be done.
Need a little extra help finding out what kind of business leader you should be? I wrote an article about it here.
Entrepreneurs also have a nasty habit of trying to do everything themselves. It’s natural to want to control everything when it comes to the business you’ve started from the ground up. But as a company grows, it requires more hands, minds, and perspectives. Entrepreneurs who try to do everything themselves will crash and burn.
It’s hard to learn to relinquish control. Finding a business mentor is one of the ways entrepreneurs can learn to let go a little. Mentors can provide valuable insight and help business owners step out of their own skin to see more objectively.
Keeping a business alive is a tough task even for the most skilled professionals. Oftentimes, things just fall out of our control. But being prepared and proactive can significantly increase a businesses chances of survival.
How do you keep your business alive and breathing? Let me know in the comments below!
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