Australia’s number of small enterprises currently stands at more than 2.3 million. Unfortunately, up to 60% of new firms in Australia fail within the first five years of operation, with as many as 20% of those failing within the first year.
Small businesses all across the globe are encountering big challenges and issues that are causing them trouble moving further.
We’ve enlisted the expertise of BOQ’s business banking professionals to shed light on the most common causes of small-enterprise failure and how to prevent being a victim of your own.
Top 10 Reasons Why Small Businesses Fail:
1. Lack of Research
2. Not having a Business Plan
3. Lack of Business Funding they need
4. Financial Mismanagement
5. Poor Marketing
6. Customer needs or the competitors are not being kept up to date.
7. Failing to Adapt
8. Growing too quickly
9. Not getting and keeping the right people on board
10. Not asking for support
1. Lack of Research:
Due to a lack of knowledge, many enterprises fail to lack a product or service that customers want or need. First and foremost, you need to research everything from the present and future trends in your sector to who your competitors are, what motivates your target audience, and the demographics of your ideal customers.
2. Not having a Business Plan:
Martin Hoffman, Director of Business Business at BOQ in Victoria and Western Australia, says that a good business plan can help you get a handle on the direction of your business, identify strategies and action plans for you to achieve your business goals, and secure the financial backing you need to start or grow.
Writing a business plan is essential to starting a new business and reaching your goals. However, if you don’t have a strategy in place, your company will be subject to one of the most prevalent causes of small business failure: poor management. A well-thought-out business strategy will keep you on track and on task.
3. Lack of Business Funding they need:
Many small business entrepreneurs fall victim to running out of money or failing to recognize the true costs of starting and sustaining a company. And the truth is that not every small business (director)owner has the money to start a new firm. While drafting your business plan, you should include the fixed and variable costs involved in getting your venture off the ground.
Small business banking experts can assist you in determining what financial assistance you need, whether you are searching for a business loan, equipment financing, or assistance from the government.
“Cash is king,” as the saying goes. A cash flow shortage can cause even the most successful firms to fail; therefore, it’s critical to negotiate in all areas of your organization.
Always establish payment terms with your suppliers that are consistent with your company’s cash needs and expectations, and don’t wait too long for your consumers to pay for your goods and services.
4. Financial Management:
Manage your money wisely, or you’ll end up in debt cash flow or keep up with all of your financial obligations; you’re setting yourself up for a disaster as a small business owner.
Businesses that don’t keep a close eye on their cash flow can find themselves in a financial predicament at no time. You don’t want to take that risk for your company.
5. Poor Marketing:
When marketing their new firm, many start-ups mistakenly believe that “if you build it, they will come.” A small firm must have an ongoing flow of clients and sales to thrive.
Your marketing strategy should have the correct mix between recruiting new consumers and retaining current customers, depending on the type of your business and the demographics of your target audience (retention).
Direct mail, letterbox drops, local area marketing, and posters and flyers are examples of traditional offline marketing activities that can be used in conjunction with digital marketing (targeting your market through a company website and social media pages).
Although many strategies to market your small business on a budget, you must keep an eye on and measure the results to avoid squandering money.
6. Customer Needs or the Competitors are not Being Kept up to Date:
Knowing your ideal consumers and how you can interact with them is essential to building a loyal customer base. Keep your customers happy if you want to be successful in business, you must have the proper safeguards in place.
Consumer feedback surveys, monitoring and responding to customer comments on your social media business pages, and just chatting to your customers are all ways to better understand what your customers want from you.
Keeping tabs on your competition is also important since if they do a better job meeting your consumers’ expectations, you will lose business with them.
7. Failing to Adapt:
Small company and life don’t always go as planned. It’s inevitable that your business will encounter difficulties, whether they’re a result of responding to shifting market trends, unexpected events (such as the COVID-19 pandemic or natural disasters), the impact of broader economic issues (such as changes in interest rates, government assistance, and support), or even changes in your situation (because of illness or other challenges).
When a terrible hire or a bad business choice jeopardizes your company, you may need to make a strategic shift to stay afloat. You must be mindful of what is occurring both inside and externally and be ready to respond quickly!
8. Growing too Quickly:
Failure can also be caused by a lack of preparation for your achievement. Recognizing the business risks associated with your start-up business includes understanding what you will need — such as personnel, technology, business capital, and supply chain management — to be ready for your future growth objectives.
9. Not Getting and Keeping the Right People on Board:
One of the hardest things for small business owners is finding, managing, and keeping good employees. Setting up a diverse team from the beginning with skills that complement each other, the right attitude, and values that fit with your business will help you in the long run.
It’s very important to get the right people to work for you and give them a place to work where they want to stay.
10. Not Asking for Support:
It can be fun and scary to start a new business scary because there are many things to figure out. As a result, it shouldn’t be surprising to learn that many small-business entrepreneurs feel alone, overburdened, or just about to give up.
But you can get help from many places, like your accountant or a business banking expert, government programs that help small businesses, a business mentor, or a local business-to-business support group. You can also get advice from other small business owners by taking an online business course or listening to the best business podcasts.
In the end, whether a business fails or succeeds depends a lot on how well it is run. Getting a business up and going is difficult, unlike being a good employee. Even if the owners know a lot about the industry and/or business they buy or start, it’s not unusual for a new business to fail, even if it’s in the same industry.
You must investigate every facet of your organization in great detail if you want to maximize your chances of success.