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3 common reasons for business failure and how to avoid them

3 reasons why businesses fail

This post was originally featured on RedFounder.com 

Ok let's get real, no one likes to talk about failure.

And yet, we ALL fail sometimes.  We fall on our face, get up, dust ourselves off and hopefully learn how to not make the same mistake again. It hurts, but it's just part of life.

Even I have failed.  Yep, I said it.  I've had several failed businesses, failed relationships and I even failed at school (I should never have been in advanced math). But through each failure, I learn a ton.

I'm not saying that you have to fail to learn huge life lessons, in fact you can learn just as much through success.  But the fact is that sometimes you fail.

Do you know what's so much better than falling and learning from your mistakes?

Yep, learning from other peoples failures!! All the great lessons learned without the whole falling on your face part.  Aha!

I've worked with a lot of small business owners, some were successful and some were not. Some adapt and learn from their mistakes.  And some made huge mistakes that there was no recovering from.

These are the 3 most common mistakes that lead to business failure

  1. No marketing plan.  This is huge! You need to know who your target market is and how you'll reach them.  Don't think this is something you can ignore in the planning stages and figure out once you are open. Nope. Marketing should be part of your plan before you ever think of opening your doors.  If people don't know that you exist, you will have a very hard time staying afloat.
  2. Poor management.  Many times people are unprepared for the demands of running a small business.  It takes all of your time, money and energy to keep a small business alive.  Don't be fooled into thinking that you can hire someone to run it for you, at least not for a while.  In the beginning it's all about you and you have to be honest with yourself about just how capable of a manager you are.  If you make rash, fearful decisions or if you are not great at managing people, you will have a hard time making your business work.
  3. Horrible customer service.  Once you start to get customers in your door, make sure you give them a reason to come back.  I can't tell you how many businesses close because of poor service.  Think about it, we've all been places that had horrible service and not only did we decide never to go back, but then we told all of our friends about how bad it was.  Which further hurts that businesses chances of succeeding.

So how can you avoid failing?

  1. Develop a plan.  If you have never marketed a product or service before, my advice would be to hire someone who has.  Find someone with a successful track record in reaching the kind of customers that you want to reach.  If you don't have a lot of money to dedicate to marketing, it might be a good idea to hire someone to help you come up with a marketing strategy, then you go ahead an implement that strategy.
  2. Get real with yourself. Do some soul searching, are you really management material? Do you know how to hire, train and motivate a team?  Can you track expenses and manage your finances? Do you make wise, well planned out decisions?  Or are you impulsive?  If you find that maybe you aren't the best manager, find a partner or manager who is.  Find someone who can help you make key hires.  When I started my first business I called my advisor for every hire just to make sure I was on the right track, until I got the hang of it.  Don't be afraid to ask for help with things that you struggle with.  It might be worth taking a strengths finder test to see where you are strong and where you need help.
  3. Make customers service part of the core of your business.  New hires should be evaluated not only for their abilities but also because they are great with people.  Make sure that your employees are educated on your business, understand what kind of experience you want each customer to have and can handle any disputes with grace and maturity.

There is no such thing as a fail-proof business.  But you can get prepared to be a business owner.

Writing a business plan is the first step.

The planning process is less about writing a document for an investor to read and more about preparing you to be a business owner.  Give yourself the best chance of success, start with plan, get expert advice and be honest with yourself about where you need help.  (Need help with your plan? Click here.)

What other reasons can you think of? Or prevention methods? Tell us in the comments below.
photo credit: nimbu via photopin cc

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