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Failure is not something that many business owners like to think about, let alone discuss. That said, it’s something that all business owners should take seriously. Simple awareness and mental preparation for such an event clarify the importance and value of keeping your business above water. Avoidance only pushes planning and preparation away. These “just in case” plans might just be the very things that save a struggling business. Studies have shown that 50 percent of all new businesses fail within the first year – that’s a high statistic, isn’t it? With that in mind, as a business owner, it’s important to be aware of the most common causes of business failure and how to avoid them
Causes of Business Failure #1: Lack of Planning
There’s a popular saying in the business world – “failing to plan is planning to fail,” and it’s spot on. If you’re not willing to make the time to plan for success, then you are ultimately planning to fail. So, with that in mind, it’s important to understand what you need to plan in order to avoid failure.
Pay attention to your business finances constantly. What money do you have coming in? What money do you have going out? Simple. Make a short term financial plan as well as a long-term one. Never take your financial state for granted. Know where you are and where you want to be.
Branding and marketing are also at the top of the list of things you should be planning out. Marketing is incredibly important. Without an effective marketing plan, even the most incredible product or service in the world won’t be discovered by potential customers and clients.
Causes of Business Failure #2: Failure to Secure Data
Once a business loses the trust of its customers, that’s it in terms of success. Building trust takes time but winning trust back takes even longer. The security of sensitive data is so important to any business. It has been a trend for years to be on local backups, such as to the cloud or external hard drives, but that’s not always enough. However, the future of data security and long term storage is in data centre building, to ensure there is always a secure backup of important data.
Causes of Business Failure #3: Overdependence On One Customer or Stream of Income
A mistake that many new businesses make is landing one big customer and relying on them solely for business success. The question to ask yourself is this: If your biggest customer or client decided to use another company’s products or services would your business survive? If the answer is no, this is a real problem. Never put all of your business eggs in one basket.
Just because you’ve got one big account, doesn’t mean you should stop looking for more customers. The reality is that at any point you could lose that customer. If or when that happens, your business needs to be able to survive. I always recommend to my business branding clients that they develop multiple clients and/or streams of income.