Running a business is no easy feat. It takes a great amount of time, money, and dedication to maintain a successful business. Unfortunately, most people do not have what it takes to make it work long-term. According to the Bureau of Labor Statistics, approximately 20 percent of small businesses fail within their first year, 50 percent fail by their fifth year, and a whopping 70 percent fail by their tenth year. While it is not possible to prevent all circumstances that could result in the closing of your business, you can lower your risk of business failure. Here’s a look at why some businesses fail and how you can avoid having to close your doors permanently.
Inadequate Exchange of Money for Value
With more than 32.5 million businesses in the U.S., it is not enough to simply purchase inventory and slap an open sign on the door. You need to provide your customers with real value in exchange for their hard-earned cash. There are several reasons why adding value makes a difference in your success. First, businesses that over-deliver are more likely to create ‘buzz.’ This means your customers will spread the word about your business and will be more likely to choose you over your competitors. Providing value to consumers will also help you create a positive brand image and reputation over time.
Businesses in all industries require exceptional leadership skills. Without a strong leader to guide your small business, your vision may be lost and with it your ability to successfully run the organization. If you do not possess the necessary leadership skills to run your business, hire someone who does. An exceptional leader will make smart management decisions, properly supervise staff, enhance productivity, and approach new opportunities with creativity and a clear head.
Lack of Research in the Current Market
Where many businesses fail is in the research stage prior to implementing their business venture. When you fail to investigate the market before investing money, you risk losing your investment and much more. In today’s fast-moving society, many markets are overserved and there is minimal room for new organizations to step in. If you are insistent about joining an already saturated market, be prepared to bring something new to the table.
Failure to Effectively Communicate with Customers
Communicating with your customers is more important than you think. It is important to understand what your target audience is looking for in a product or service, and how they plan to get it. When you fail to open a dialogue with your customer base, you are missing out on important information that could help your business gain a competitive edge. In addition to maintaining open communication with your customers in real life, you also want to stay connected online through social media and other web sources.
The Bottom Line
Although the failure rate of new businesses is fairly high, this doesn’t mean you can’t run a successful business. When you understand why businesses fail you can take the necessary precautions to prevent failure and guide your business in the right direction.
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