If you’ve read (First) Five Reasons for Small Business Failure and (Next) Five Reasons for Small Business Failure, I hope you’re not too downhearted about the prospects for your small business. Okay, you now know there are fifteen reasons – at least! – that small businesses fail. But remember: ‘Forewarned is forearmed.’ By knowing the pitfalls, you can hopefully avoid them – so be brave and read on…
You expand your business too quickly
If expansion is warranted after careful review, research and analysis, identify what and who you need to add in order for your business to grow. Then with the right systems and people in place, you can focus on the growth of your business, not on doing everything in it yourself.
“Make sure your expansion can be supported by either long-term capital, working capital, or both,” advises business mentor and author David Mellor.
You don’t have the skills you need
Many people who decide to start a small business are not highly qualified and/or experience in finance, business, management and human resources; yet knowledge in these areas is vital when you’re the boss –and also often the bookkeeper, interviewer, manager, HR expert, sales team, marketing division, social media director… the list goes on.
“You’re the founder. Which makes you the leader. Matters not if you’re a business of one, or 1000,” emphasises Eric Wagner, life-long entrepreneur and founder of Mightywise Media. “Lack the ability to strongly relate with people? Gain the skills necessary to do so. Struggle with anger issues? Solve it with anger management. Entrepreneurs who succeed spend time with personal development. I have never once met an angel or venture capital investor who doesn’t investigate the character of a founder and his/her team before whipping out their checkbook.”
You don’t have a Strategy
To build a business in your identified niche, you need to have a clear idea of where your business is headed and what you need to do to ensure it gets there. It can be hard to think about tomorrow when today is crazily busy, but you must – and then you must think about next month and next year too. Treading water isn’t enough when you’re not in charge of the water level!
You Lose Touch with Your Customers and Business
“Your customer holds the key to your success deep in their pain, behaviour, dreams, values and the jobs they are trying to accomplish,” says Wagner.
You have limited time and limited capital, so what little you do have must be directed to attracting and retain potential customers – and if you’ve done your homework, you should know how and where to find them. Once you’re successful, don’t slacken off; your customers are still important if your company is to prosper and grow. It’s easy to let things slip and become complacent once you’ve had a measure of success. Don’t. Strive just as hard as you did when you were hungry for success.
You become the victim of fraud
Educate yourself about fraud and business crime, and ensure that you’re up-to-date on cyber-security, data protection and fraud prevention. Have systems and insurance in place to protect you from these problems if they occur. Research undertaken by AAT (The Association of Accounting Technicians) earlier this year showed that 42% of SMEs have been victims of cybercrime, while the Association of Certified Fraud Examiners’ (ACFE) 2014 Global Fraud Study revealed that on average, companies loses around 5% of their annual revenues to fraud.
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We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!