Common Links Between Failed Businesses
Be they mom and pop shops or large franchises, many failed businesses are the victims of their owners’ mistakes. The economy is tough right now and consumerism is certainly dwindling, but the majority of failed businesses cannot blame their demise on these unavoidable issues alone. This is not to say that the owners are unmotivated and do not work hard, rather, they are working in the wrong way.
If you are a new business owner, or if you simply want to ensure that your successful business remains so, take a look at these common reasons for failed businesses. Doing so may keep your business safe and ensure that you never have to file for bankruptcy.
Lack of a Written Business Plan
Many new business owners rush past this absolutely necessary step to ensuring a safe and profitable business. It’s understandable that you would want to get right to work and making money, but if you do not have a concrete business plan you will likely be blindsided when trouble comes knocking.
Understanding the market you’re in, consumer demands, costs and quotas, and projected profits and costs can save you time and money in the long run, although it may appear to be costing you at first. If you equate starting a business with purchasing a car or house, you can see the logic here. Only a fool would make a large purchase without researching and looking at the current housing or automobile market. You would test drive to ensure that you are not buying a lemon. Few would ever dream of simply laying down a down payment and signing contracts without doing their homework first.
Lack of Frugality
When a new business starts making money, it is often tempting for the owner to start investing it as soon as possible. They may be tempted to buy or lease a larger storefront, hire additional staff, or simply start purchasing odds and ends that they think they need for their business. Some even celebrate by taking a vacation. While these are things you should eventually concern yourself with, it’s important to not rush into unwise money-spending practices and purchases.
Start making a quarterly cash flow statement and determine how much spendable profit you actually have. Take a look at how much of your expenses could have been prevented or reduced by streamlining, having better maintained equipment, or even buying in bulk. It may shock you to learn how much money is actually going out the window on small, unnecessary purchases. Making a quarterly statement can teach you a lot about how you are running your business’s finances.
Lack of Organization
A common problem with many businesses, large and small, is a lack of organization through operational systems. There is a frightening amount of money being lost to companies that shoot from the hip and do not establish proper protocols and procedures when it comes to staffing, inventories, and orders.
It is nearly impossible to run a tight ship if you do not implement and enforce job descriptions, training, and basic business procedures. While this may cost you some money t get established, it is money well spent, and an overwhelming amount of successful businesses can attest to the important of their operational systems.
Lack of Loyalty in Customers
Satisfied customers are great, but they can be easily attracted to another company or store by way of lower prices. Loyal customers will stay with you even though your prices may be higher. Knowing how to establish loyalty over satisfaction, however, is a major problem for many businesses.
Loyalty can be won over, despite higher costs, by outstanding quality. Emphasizing customer service quality is one of the easiest things you can do to ensure that customers will choose you over “the other guys.” You can also focus on improving or at least emphasizing the quality of your products to customers. Don’t be afraid to hand out customer satisfaction surveys. You will get honest feedback from people with nothing to gain by lying to you.