Avoid failure........ #75
- Adrian Dionisio - business737 owner
- Aug 28, 2022
- 6 min read
Updated: Jan 14
Too many businesses fail. It is tough. There is a silent war on small business owners and the consequences are devastating. Broken homes, divorces, failed marriages, families torn apart, tears, suicide and misery. Unfulfillment, mental health problems and depression are also commonplace. The consequences are very serious.
It doesn’t have to be that way. It is possible to be in control, you can decide how modest or ambitious you want to be. What is success? Well it all depends on your personal goals. It is in your hands.
This article will cover the following topics
1. The main causes of business failure
2. The warning signs of business failure
3. The devastating consequences
4. Why new businesses are at more risk
5. How to prevent business failure
6. Turning negative into positive
1. The main causes of business failure
The causes of business failure are endless. Here are some of the most common;
Lack of differentiation
Poor time management
No clear
Weak strategies
Ignoring accounts
Poor cash flow
Debt
Dependence on a few big customers
You can solve any business problem by asking ‘why’ 5 times (hit this link to read more). The brutal and uncomfortable truth is that more often than not it comes down to the psychology of the owner.
There are always going to be problems. This is business and this is life. Growth and success come from anticipating and responding to these problems. They have to be faced. Yet they are often ignored and this has serious consequences.
Tackle your business problems head on. Do not do nothing and hope they will sort themselves out. If you do the problems can get bigger. There is every chance they can spiral out of control. Take the initiative and be pro active in facing the inevitable and continuous challenges that will arise.
Listed below are some more common reasons why business fail.
Weak leadership
Overdependence on a few big customers.
Inexperienced Management Team:
Underestimating The Importance Of Cash Flow:
Lack of Focus
Not Knowing about your Competitors
Not Seeking a Professional Advice
Lack of Clearly Defined Goals
Poorly Communicated Goals
Poor Execution
Failure to React to Changing Circumstances
Underestimating the Complexity
Ask why could this be happening within any business. What is the root cause of all these problems?
Most problems are due to the psychology of the owner. It’s a harsh truth but at the same time enormously empowering. As a business owner you can be pro active and take preventative action. Where there is a will there is a way, in life and in business. The same business principles and concepts always apply. Use them to resolve problems. Failure is not an option, unless you allow it to be.
2.The warning signs of business failure
Pay attention and look for the red flags. The warning signs are signals that you need to take action, to make changes, to fix what isn’t working.
Lack of cash
Your customers are paying late
You don't know your business' financial position
Constantly 'firefighting' issues
Loss of key customers
Low Sales
Behind on payments
Credit limit reached
Increased complaints
High turnover
More problems
Fatigue
Loss of passion
Let’s use lack of cash as an example. Lack of cash is a massive warning sign. Red flags don’t get much bigger. Start digging deeper and asking questions. Why is there a lack of cash? Is it because of low sales? Why? Because your business is not generating interest or is it because you can’t convert visitors into paying customers? Why is there a lack of interest and awareness? Due to poor marketing planning and strategy? Why is that? Is it because it is being ignored or because there is a lack of knowledge in this area? What will you as the owner do to rectify this?
Do not ignore problems within your business. The smaller they are the easier they are to solve. When they get too big they can get out of control. Extinguish the fires immediately. Grab the bull by the horns and get it done. If you don’t know how then get help.
Think of your business as a ship in the ocean. Are you in control of the ship and steering it in the direction you want. Or is it floating around aimlessly in the ocean, being controlled by the winds and the currents? Do you know how to steer the ship? You should do, after all you decided to get into business so you must know.
3.The devastating consequences of business failure
There are so many repercussions of a failing business. There are huge financial costs associated with business failure. There is always a loss or reduction in personal income. Associated with this is increased debt and interest payments. This can lead to bankruptcy, liquidation and repossession. Financial turmoil is a realistic and harsh consequence of business failure.
There are also social costs. Business failure will negatively influence an owner’s personal and professional relationships. Breakdown of marriage, family and close relationships are common. There are many psychological problems caused by business failure. It can also cause adverse motivational effects and a sense of helplessness, frustration and anger. Suicide is a big problem. Mental health problems are common place.
4. Why new businesses are at a greater risk of failing?
May businesses fail because they have insufficient start-up capital. New owners frequently underestimate the cost of starting and maintaining a business.
Unrealistic expectation of income in the early years of start-ups is another major problem. Many people believe the hype and the lies that you can get started and the money just flows in relentlessly. It is a long road so prepare yourself for the journey. Cash flow problems are often the root cause of new business failure. There are many other reasons why new businesses fail:
Poor market analysis
Lack of business planning
Unaware of competitors
Bad location / Internet presence
Weak marketing strategy
Weak sales strategy
Not testing assumptions
Not adapting but remaining ridged
Expanding too fast
Again the psychology of the owner must be questioned. Many new businesses fail because people do not put in the hard hours that is required to get things up and running. Over night success is an anomaly and certainly not the norm.
Many owners give up when the going gets tough. Lack of commitment has devastating consequences. Apathy, complacency, laziness, or underestimating the amount of work required, all end with the same result.
5. How to prevent business failure
Keep on learning forever. Look what the best people are doing, use their template with your unique twist. You can be what you want to be, but first you have to believe it.
Clearly define your goals. Without goals how can you have any direction or guidance? You can’t. Think big, aim high and don’t be scared. If you aim for the stars and fall short you will still reach the moon, which is not so bad is it (I think I read this on a birthday card or somewhere like that)!
Various ways to prevent business failure
Prepare and follow a business plan.
Know your numbers and business scoreboard
Have an effective marketing strategy
Have an effective sales strategy
Measure and test everything
Pivot when your assumptions are proved incorrect
Know your customer and market intricately
Do everything to make your customer happy
Hire a Business advisor
Offer more value
Discover opportunity through testing and learning
6. Turning negative into positive
Life is full of fails. We all have them. Personally some of my best learning experiences have been when I have taken my biggest losses. If it does happen you have to move on because this is the only viable option. Nothing else makes sense. Embrace it and use the experience to develop a deeper understanding of your self, your business and life in general. Build resilience through these experiences .
Failure itself will seldom be as bad as the fear of failure. Accept what has happened and the associated feelings and emotions. Your life is not going to be over. Don’t give up, go again. Learn from mistakes. Maybe this is the signal to make major changes in your life. Don’t isolate yourself, instead surround yourself with positive people and find inspiration.
Put things in perspective. Every success comes from failure. No one has win after win since birth. We learn to walk by falling. Over and over again. But we keep learning and persist. Later down the line we run. So with failures in business we must examine what worked and what didn’t. What could we do better, what would we not do again? Critical and analytical thinking allows us to innovate, redirect and try other ways the next time.
Failure is not the end. Use it to your advantage. Turn the negative into positive. If you never start the business that you've been dreaming of, you'll never fail. As they say, it’s better to have loved and lost than to have never loved.
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