A report by Dun and Bradstreet has revealed that small business failure has increased by 40% over the last three years. Another report by the US Small Business Administration has observed that over 50% of small businesses are failing in the first five years. It cannot be just a case of misfortune that so many businesses are losing ground permanently. Let us go through some of the reasons why small and medium sized businesses fail to survive.
Innovation and planning are essential for a successful business. The pre-planning that is done before setting up a business has to focus on an exhaustive business plan. A business owner with a systematic and methodical approach will ensure proper implementation of the business plan to meet the business goals. Most of the small businesses falter at this step and get started without any plan or future projection and end up nowhere near where they had expected.
Technology today can complement a small business in many ways. Small businesses can put automated accounting, e-purchasing, e-shops in the Internet, sending e-catalogs to customers etc. to good use. A business failing to recognize the importance of technology in their day to day activities will be slow in meeting the market demands and eventually their business goals.
Owning a website may be a start to the use of technology, but using certain techniques like SEO and PPC can help your business stay ahead of the competition. Businesses that stay away from technology may fail to retain customers, leading to stagnant sales.
Unrealistic expectations from the business and underestimating the funds required for the survival of the business majorly contribute to the bankruptcy of a business. Having a good idea of the funds required for starting and staying in the business is essential. A business owner should be ready and prepared to invest in the business for months or years before the business makes substantial profits.
Providing quality may cost a bit more to the company. But it will have its own good implications in the long run. A business trying to minimize costs by neglecting quality may create its own road-map for the downfall.
Below par quality can also be associated with the service rendered to the customers. Most failing businesses do not identify the scope customer service carries with it. Customer service becomes critical for products where customers find easy substitutes in the market. If customers are served in an attentive, professional and polite manner, it can go a long way in stabilizing the business in difficult times.
A business offering a wide range of products is good. A business has to be proactive and make necessary changes like endorsing, modifying or even removing products. A business, not flexible with its products, may not be able to keep pace with the ever changing customer preferences.
Poor marketing strategy
If the business fails in understanding the needs and preferences of the customers or in communicating the benefits of its products and services properly, it may face a tough time staying in the industry. A sound marketing strategy generates the required awareness that a business needs for its existence. Through its marketing strategy, a business defines the products or services that it offers to its customers. If the basic function of the marketing strategy goes wrong, the business may start receiving the wrong customers, which may not add any value to the business.
A small business can leverage the benefits associated with Internet marketing. For many successful small businesses, it is one of the main marketing strategies as it is effective and inexpensive.
A business may do well if its owner has sufficient knowledge about the systems and processes associated with setting up a new business. In addition to this, it also helps if a business owner has the various skills associated with cash flow, employees, production, distribution, etc. Its unfortunate that a business has to close, but following certain rules can help small businesses in sustaining itself well.