Business trend failure... Why does it happen?
With an alarming rate of businesses in Australia ceasing to operate within the first 5 years (approximately 50%, according to the Australian Bureau of Statistics), I'm passionate as a business coach and small business owner myself to do my part to positively impact the rate of businesses succeeding.
I believe that there are a few key areas that set apart those that succeed in business, and those that don’t:
1. Lack of planning
Lack of comprehensive planning (or no planning at all) is a major factor in businesses failing. It's critical for any business owner to have clarity of where they are now and making sure they're on the right path to achieve their goals.
A comprehensive business plan should include the businesses’ vision and mission; a financial plan and summary of data such as intellectual property, shareholdings and capital; success criteria and goals, including an exit strategy; a team summary; a marketing and sales strategy; a product and services overview; an industry and competitor analysis; customer analysis and distribution plan; and a strong road map of strategies.
Planning reduces the need to make reactive decisions and rather, proactively planning for success helps to avoid common mistakes that business owners make.
2. Lack of business acumen
A lot of business owners make the mistake of being educated in their industry but not in business operations.
It’s vital for any business owner to develop their business acumen and be proactive about learning new skills to benefit their business. This extends to professional development of their team, too.
Poor management and operations can lead a business down-hill quickly.
3. Lack of research
Lack of research and understanding of competitors and industry trends is something that many business owners fail to oversee.
Sure - they may have a great idea and may even have established expertise in their field - but, without proper research and ensuring their idea is viable, their business can go backwards before it goes forwards.
Not only is it vital to understand key industry trends & competitors but it’s also critical for any business owner to define their target market and get to know their customers, too.
4. Lack of cash-flow and capital
People generally don’t know the areas in their business that are triggers for declining and lumpy cash flow (and how to change it).
For example, they may have too much stock, their debtors and creditors might be out, they haven’t reviewed their expenses, their wages have increased but their revenue hasn’t – or, quite simply, they don’t understand their financials at all.
Another very common set-back for start-up businesses is running out of cash-flow due to lack of capital. It’s so important to assess capital requirements in the planning stage of a business, before commencing operations. That's why planning as soon as possible, will always set you a step ahead of the rest.
There are a range of challenges faced by business owners but I recommend addressing the above steps to maximise the opportunity of reaching business success. Specifically, planning and business development is a viable option at any stage of your business.