Business failure implies that a business firm is unable to continue its operations in its original firm.
It is often said that no business firm plans to fail, but businesses today still fail owing to some internal and external variables.
Also Read: 7 tips to succeed in your first year of business
Good management in business which encompasses the ability to develop and implement good business plans, obtain and employ resources effectively, is most times overlooked by small business owners.
Failure in business can occur when a business firm fails to discharge its responsibilities to its stake holders, employees, suppliers, customers and the community as a whole.
On the other hand, business discontinuance is a proxy of business failure because in the economic sense, a business could be regarded as a failure if it is not earning a rate of return on investment that is commensurate with its opportunity cost of capital.
What Is Business Failure?
Business failure implies that a business firm is unable to continue its operations in its original firm. Although this situation does not just occur in a one day, a number of danger signals are usually eminent.
This article highlights 8 things to do to avoid business failure.
Industry Experience
How well do you know the industry in which you are operating? Many business owners jump into a business because it in trend.
It is common among small business owners to start the same type of business that their friends or neighbors are into without knowing fully what the whole business risk, opportunities and threats are.
It’s simple; businesses managed by people without prior industrial experience are exposed to chances of failure than firms managed by people with prior industry experience.
Planning
Plan, or plan to fail. Planning starts with understanding the common forms of business organization that suits your business.
Planning is a bridge between now and the future. Every business needs a business plan but some businesses tend to neglect this vital part.
A business plan is the road map of any successful business. It gives a sense of direction and creates awareness of an accomplishment. It also helps you maximize your resources.
Planning a business will help you take into consideration risks, opportunities, threats, and cost implications of every step you’ll take.
Start With Sufficient Capital
Capital is the amount (in cash and resources) invested in a business. Businesses that start under-capitalized have a greater chance of failure than ones that started with adequate capital.
Never Start Your Business In Debts
Debt is a liability. No matter how great and mind blowing or promising your business idea is, never start your business in debts.
Businesses that started with deep financial obligation to one or more creditors stand a greater chance of falling.
Also Read: 7 Actionable steps to survive and get out of debt
Most times a new business will have no customers in the first few months, you can’t be hundred percent sure what the response of your customers will be. If things don’t work out, (putting fierce competitors in mind) your business will cease to operate.
Ensure Perfect Business Location
This external factor to business success cannot be overlooked. Your business location has the power to control the number of customers you’ll have on a daily basis and this in turn has a directly proportional effect on the number of sales and profit you make.
For example, you’ll always find room cotton and carpet sellers not at the inside of markets here in Nigeria, but at the roadside of the market.
Also, you can’t expect a vulcanizer to stay deep inside a street but at the road side. Your business location if chosen carefully is an edge for your business success.
Ensure Continuing Marketing
The sole aim of marketing is to convince an individual to take action on your product or service i.e to get more customers. Many businesses stop to market their products or services once they have a number of sales per day.
A certain percentage of the profit you make must be invested into getting more customers by turning prospects into real customers.
Marketing strategy helps you to put your business product or service in front of people at all times. An Online presence for your business can help you achieve this.
Manage Debts Owed by Your Customers
“A debtor is someone who owes, knows he owes and agreed to pay that amount at period of time.”
Small businesses fall into the trap of making too many credit transactions. When you allow a credit transaction, your customer must know exactly how much he owes and must agree on a date to pay as stated by you.
A paying customer is the life blood of a business. When your customers fails to pay, your business will find it difficult to continue because there are certain business expenses you incur as well.
Sooner, you’ll start to see the signals that your business will discontinue.
So, allow only credit transactions when you have mechanism in place to receive payment from your debtors at the stipulated time.
Ensure Quality Management
Businesses managed by people without prior management experience have a greater chance of failure than firms that are managed by people with prior management experience.
Your business management cuts across planning, ensuring proper record keeping of your business transactions and financial control.
Without good management of a business, mile stones can’t be reached. A business with good management affects sales, profit, customer relationship, employee welfare positively and this gives room for expansion.
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