Nine out of ten companies fail within the first two years of operation. The reasons for failure are many and varied, but the main reason is that the owners and/or management did not have the skills and training required to make the business a success. As a business owner it is your responsibility to ensure that you develop those skills and/or acquire new ones. Here are nine of the most common reasons for failure:
* Failure to properly assess risks. This is one of the most common reasons for failure because businesses often do not fully understand the risks that exist and how severe they are. They therefore fail to plan for, and respond to, potential problems. If you don’t have adequate policies and procedures in place for inspecting and controlling access to hazardous situations, then you’re going to be in big trouble. As an example, if a factory is making glass products that are heavily flammable, then there should be a firefighting team on hand.
* Lack of attention to detail. All too often, business owners get so caught up in running the business day to day that they completely neglect detail. This can lead to all kinds of issues, such as sourcing resources and/or manufacturing materials that are too expensive. Other issues include paperwork that is incomplete, inaccurate, outdated or not easily accessible. It also may lead to poor quality products, or even equipment that does not work correctly.
* Inefficient communication. This is perhaps the most important skill a manager must possess. There are many ways in which managers and other employees can communicate with each other, but the ability to effectively communicate is paramount to a successful business. When this fails, then the business will literally crumble around them, leading to the ultimate failure of the business.
* Poor financial management. Most businesses are extremely dependent on the amount of money coming in, as well as the amount of money going out. Many business owners fail to properly budget for the money coming in, or fail to set aside enough money to pay their bills on time. Failure to pay bills on time is often an indication of financial problems and should be avoided at all costs.
Unfortunately, most businesses fail because of one or more of these reasons. However, there are many ways to ensure that your business is well run, financially sound, and successful. The key is to make sure that your finances are looked after, and that you do not let any of these problems slip past you.