It is an accepted reality that not all businesses will succeed and that most will not make it past 5 years. According to a business statistic by hiveage 70% of all startups will not last 2 years and of the 30% that do make it half won’t reach 5 years though those numbers vary per website. These are very depressing statistics and while there are no guarantees that your business will succeed like everything in life there is a lot you can learn from failure. Fearing failure only holds back from what you can learn from that failure so that you can make your business better or improve an existing idea. Before we can learn how we can learn from them we must first see what are some of the causes of business failures.
There are some factors that comes up when a business fail one of them being poor business planning. Business plans are a summation of your goals, visions, it’s strategic plans and how everything is going to be operated in your business making them outlines to your businesses future. It takes time to create one and of course its not always perfect but the planning that goes in it can have an effect on the performance of your business. First thing is financing as there will always come a point where your business would need capital or some other form of finance to support it’s activities and that is where third parties come in. Third parties like lenders, investors and shareholders feel more comfortable in investing in your business if they can see how well your business is doing which they can through your business plan and generally speaking and it should be known that there are other things that goes into your business plan too like your strategy, marketing plan and background information about your business present health. If your business plan is weak in any of these areas then you’re at risk of jeopardizing your business’s financial operation because investors/lenders may not be inclined to supporting your business. A solid business plan should be something all businesses must have to secure themselves.
Aside from business plans decision making have another huge impact on your business. According to the book Small Business Management, Michael Ames Professor of Management, at Emeritus, California State University Fullerton there are 11 reasons why businesses fail which are lack of experience, insufficient capital (money), poor location, poor inventory management, over-investment in fixed assets, poor credit arrangements, personal use of business funds and unexpected growth. Deciding where to set up your business takes critical analysis because you want to make sure it is close to your target market and that the products/services offered are more affordable than your competition. Poor finance decisions or inventory management can be happen because of bad decision making or incompetence and failure to recognize the market trend can leave you out of the loop in whats going on in your industry.
Point is there a lot of ways your business can fail but when it is not the end of the world if you choose to do something about it. There are ways you can use what you learn to your advantage and not giving up on your business goals could be the first step to the path of success. Many of world’s most popular companies existed because their founders have experienced failure over and over again each time they either learn from it or tried something else but they never gave up. Colonel Sanders founder of KFC for example spent most of his life doing multiple jobs but he unsuccessfully couldn’t hold them. He finally found his calling owning a small service station at age 40 where he served southern dishes and perfected the recipe to his famous fried chicken only to lose it due to the construction of a new highway which sent traffic away from his restaurant. He spent the next several years trying to sell the recipe to his chicken recipe having face over 1,000 rejections from other restaurants before one said yes and gave him 5 cents per chicken in return from which he built his empire. As of now KFC operates in 123 countries and makes $ 23 billion a year.
The following step after deciding not to give up is to acknowledge past mistakes and not try to hide them. When we look back to where we went wrong we can learn from what works and what doesn’t work so that you can implement better changes the next time around. Next you should prioritize the task that leads to positive changes and not focus too much on activities not involved with it. Getting the right people to help get your business to where you want it to be helps create strong relationships and the people you work with could help keep you posted on how your business is doing and seize other opportunities. The real changes don’t happen instantly but takes time to form so in this process of restarting from scratch you should take the time to review key decisions you want to make, develop new skills and reinvent your business plan if there is something you want to improve on. Refer to experts or advisers if possible so the next time around your business would be better prepared for challenge.