Do you own small businesses or are you a small business owner? Or maybe you’re considering starting a business?
If so, there are several elements in business that you should keep a close eye on to ensure everything is smooth sailing for the foreseeable future.
A significant number of small businesses go out of business within the first few years or, at the very least, experience some difficult scenarios.
There are, however, ways you can avoid this!
This article will discuss the 6 common failures of small businesses and what you can do to prevent these things from sinking your business.
Insufficient Funding in Small Businesses
The primary reason a small business will both begin and end is for the purpose or cause of monetary value and funding.
It is vital in the upkeeping of any business to efficiently and effectively manage money and, of course, make more funds than the business costs!
If the business lacks the money required to pay all debts, items needed, and bills you will likely be required to declare bankruptcy, liquidate, or enter into another form of insolvency agreement.
Lack of sufficient funding to continue opening the doors, so to speak, of a small business is generally the financial downfall of these types of businesses, but there are various ways in which you can avoid this occurrence.
There are multiple financial aid packages you may be able to access, intended to keep small businesses alive and well!
You could also try pursuing venture capital, a business that invests money into projects with high potential to succeed.
Avoiding Digitalisation in Small Businesses
We live in a technology-driven society.
Everywhere you look there is a new form of technology taking the population by storm.
Online shopping is ever-rising and looks as if it may be the way of tomorrow. For this reason, it is vital that your business has an effective online presence in order to attract new and returning customers.
Especially since the beginning of the COVID-19 Pandemic, many individuals have switched their shopping and hiring habits to be predominately reliant on the online platform businesses provide.
If you do not have a space of the sort, likely, your company will simply be left behind.
There are various, simple ways that you can digitalise to ensure your business is up to date with modern trends.
You could join a social media site such as Facebook or Instagram and focus on pushing your business through those platforms as they are quite popular, and most Australians will use at least one of them.
You could also create a website to sell and advertise your product, a very common and practical solution to a lacking online presence.
Small Businesses & Poor Planning
Planning in business is key. Without a proper plan, there is not much in between a healthy and slowly crumbling business model.
In order to prevent your business from failing, it is vital that you take the time out of your busy schedule to create an adequate business plan.
There are at least two types of plans your business should have in place; a financial plan and a long-term strategy.
A financial plan is vital in making sure your business will create profit, taking into account all feasible expenses the future may hold.
You should be planning for employee expenses, cash flow, production costs, all other expenses, and an emergency fund in case of, well, an emergency!
An emergency fund is an essential part of financial planning as if an instance occurs where you find yourself unable to maintain the business due to a personal emergency, on a negative cash flow where you are losing more money than you are making, or any other major financial occurrence, you will not simply have to liquidate the business, close it, or enter into tonnes of debts.
A long-term strategy is another key element in preventing your business from being forced to close down.
You should have planning and goals for what the future will hold for your business and how each role in your company will have to behave to achieve this.
You should be identifying opportunities for growth, predicting what the future will look like in your particular market, and using resources as needed in order to achieve an effective long-term strategy
Avoiding a Business Niche
In business, it is little known that as a small business you should find a niche a stick to it.
Without a niche, a small business will generally have a higher likelihood of failing in the future. But why is this?
Surely selling to a wider audience would attract a larger clientele. Well, this is usually not the case. Small businesses should be selling their product to a particular group of people that will enjoy and use their products.
It is a common misconception that focusing on a particular target audience only really works for businesses with a large client basis, aka big businesses.
Large companies, due to their lack of availability and large client basis, sometimes will leave something to be desired within customers which is where small businesses can come in and target those customers!
Poor Researching in Small Businesses
Research is yet another necessity in initiating and maintaining a small business.
It is not uncommon for an individual to have what they believe to be a genius idea and start a business without too much thought.
This is dangerous! Before starting a business and investing all of your time and money into making it work, make sure you take the time to study a bit of business and, more importantly, research the market you are looking to enter.
To improve your chance of succeeding in business, this process is absolutely necessary!
If you are not great with the business side of things, you may want to consider hiring someone who knows the business to help you get started.
Poor Risk Assessment in Business
Risk assessment is a vital skill to have before beginning a business.
Risk assessment is the process of considering the elements that could go wrong when running your business and applying your skills and other assets appropriately to avoid them.
Owning a small company is full of risks.
This is not intended to scare you away from the idea of starting a business, but instead, ensure you are thoughtful and balanced with your ideas and execution of said ideas.
Key Takeaways for Small Businesses
Business can be extremely difficult.
With all the elements you have to balance, you may not be able to keep up!
Some elements of a company have a particularly large sway on the success or future outcomes of your business.
If you find yourself particularly stuck and do not know how to continue with your company, don’t be afraid to seek the help of a professional for some advice.
Keep the elements discussed in mind and make changes when necessary; it may just save your business!