What is the Current Percentage of Business Failure?

Are you an entrepreneur or manager? You should be careful of common reasons for business failure. You can only scale through if you know these hurdles and the best way to avoid them. To be a successful sole proprietor, find out these major setbacks.

Understanding reasons why businesses fail is a good way to avoid failing in businesses especially if you’re a new business owner.

You need to study the market, demand, supply, and other circumstances around your business to avoid business failures.

What is the Percentage Rate of Business Failure?

40% of businesses end up failing within the first 3 years, 49.9% within 5 years, 65.8% by the 10th year, 73.3% by the 15th year, and almost 80% die off by the 20th year. 

If you’re about to embark on your open business or you are in the first year, then you’re as excited as you are nervous.

However, this starts from poor business decisions and management. But if you understand these 2 concepts in business properly, your business will last as long as possible.

Also, employ skilled and capable hands to work with to avoid making costly mistakes that might affect your business negatively.

10 Reasons for Business Failure

You won’t want to be part of those whose businesses failed right? By identifying these killers you can save your business with or without experience.

You don’t have to always be a victim to learn. Here are the most common reasons why businesses fail at different times:

1. No Business Plan/Strategy

A realistic business plan is necessary for a successful business. Outline realistic goals for your business; how your business can meet those goals, and possible problems and solutions.

Figure out the costs and inputs needed for the business, strategies, and timelines that should be implemented and met. Don’t switch business plans at random, it distorts business flow technically.

2. Wrong Location

You might have perfected all other aspects and scale through but one area that drives more sales or less is choosing the right location for your business.

This is a primary factor in business and it’s self-explanatory. You should try putting your business on the map, where the demand for your product is high. Your location has a very serious role to play in your business growth.

3. Lack of Funding

A business is just like an individual, it requires some financial buffering. This will cater for various needs such as investment purposes, irregular cash flow, and price fluctuations. 

If the business account isn’t managed properly, it can lead to bankruptcy, and borrowing money to sustain a business can sometimes be difficult and volatile.

4. Not Setting Boundaries

Some customers can be over-tasking and demanding which might begin to drain you physically, psychologically, and financially. For short, “the Never Satisfied Customers”. They can also be bad for your business if you don’t know how to manage them.

If you have one or have noticed any among your customers, quickly learn to set boundaries by saying “NO” to their excess demands. They are insatiable and can cause your business a lot of harm.

5. Limited Suppliers

A business owner must have as many suppliers as possible for his business to avoid disappointing your loyal customers.

No one likes being disappointed. Therefore, you need to make sure you are stocked up all the time even to the least expected item. You can’t say which day the demand will arise and you are the only source for that item.

6. Not Following the Business Trends

Many businesses are dying because of the lack of following the trend of the business or market demand. Business owners should embrace innovations from all angles.

Technology, logistics, packaging, and branding are some critical areas why businesses fall out of competition and the market at large. Most business sales and advertisements are on social media platforms and every determined business owner should embrace that concept too.

7. Not Understanding the Market and Clients

It is important to understand the market you compete in and the customers’ buying habits. It’s not only by choosing a market and renting a location.

You need to understand the skills of communicating with the customers and the marketing system globally and around your location.

8. Early Expansion

Expansion is proof that you are successful in your business, however, don’t be too quick to sky-rocket.

Spend good time at the level you are operating and be sure to make the best decisions as you expand because plans and strategies are different at various business levels.

You might have to invest more both financially and materially. If you aren’t sure of your stand, take your time and think again.

9. Choosing a Low-income Business 

Good business ideas with the wrong implementation can’t transform into a successful business. Therefore, choosing an industry where you can have long-term development is needed. 

You cannot be viable if you do not make a profit. The dot-com lesson is necessary for survival and you need a steady cash flow. You won’t only need good ideas and determination to make it through the very competitive world of business.

10. Audience Outreach Challenges

It is important to explain to people your product or the kind of service you offer. Make sure it improves livelihood.

If it does, then preach or market yourself to your customers so they see value in what you sell or how they can benefit from it.

How to Avoid Business Failure?

To succeed in business is to first understand the type of business you are into, the requirements, and demands, and have a unique strategy to follow up your business.

Business is like a new baby that has to be nurtured, therefore, you have to be physically sound and financially buoyant to be successful in your business.

You also have to avoid the common errors and hurdles that are responsible for business failures that have been listed.

Above all, understand that you are the risk bearer and make the best and most profitable decisions for your business void of emotions.

When is the Best Time to Expand a Business?

This is one important aspect of your business because expansion is key to a more successful or failed phase.

For you to get it right or know the right time to expand your business you have to identify these specific signs and be sure that’s the exact feeling before you make that step.

1. Customer Demand: Once several customers are interested in your product or service and your current status and equipment can’t help you out successfully, then it’s time.

2. Don’t Relax in your Comfort Zone: As we do things, our comfort zone will try to get back; thus, always make an effort to challenge yourself and your organization to do better.

3. Need for Brand Refresh: If you think your company isn’t communicating with the brand. One of the ways to resolve these is to update your website and branding.

4. Industry Awareness: Be knowledgeable about the current developments in the industry and also economic conditions. This kind of insight helps to find openings for expansion.

5. Certainty of Demand: Next time when it is supported by team commitment, expand operations into the areas where there is a demand/those places are expected to be in the areas where there is a demand.

6. Serve Underserved Markets: Seek possibilities of extending your services into areas that call for much attention proving the need for your help.

7. Financial Evaluation: Have to review financial statements to make sure the necessary infrastructure is in place to expand its operations and available resources by taking advantage of them.

In a nutshell, you can avoid business failure by strategically making decisions that will favor you as the brand owner and the business at large. However, the most common reason why most businesses fail is due to cash flow.

Avoid wrong influences or making wrong moves or the right ones when not necessary or even too early. By taking these ideas into consideration, you will achieve a great height in business and make the most of your business.