Why businesses fail and how to avoid it – Part 1
In the interests of always trying to offer useful advice to our customers and of course potential customers, we write these articles to see if we can help in more ways than just giving financial advice.
Starting a business and making a success of it is not easy. There are many reasons for failure but there are also certain hard and fast rules that will help you succeed. Hence this series on why businesses fail and how to avoid it – and this is part 1…
Don’t fall when you fail – be prepared
Appropriately therefore the first point we want to make is that failure is not uncommon. It will happen along the way with every business. The failure to lead correctly, the failure to set up correctly, the failure to recognise and pursue the right clients or customers. These are common failures.
The solution is to ensure that a) you are expecting and are prepared for some failures and b) you learn from failure and don’t fall when it happens – just correct your course and move on. If you set up wisely with capital to cushion times of failure you can simply dust yourself off and correct course.
Be an effective leader
If you are the owner of a business that employs people you are by default a leader. Leaders need to effectively lead, making the right decisions and motivating people. Poor leadership is a common cause of failure.
The solution is to ensure you equip yourself with some leadership skills, or if you can afford it, take a back seat to an appointed leader. Get role models learn from and remember communication and leadership are inextricably linked. You need to learn communication skills too if you’re not getting through to people. You also need to handle finance well – or get a professional accountancy firm to advise you accordingly.
Get it right from the get go!
Many businesses fail because of the lack of short- and long-term planning. Your plan should include where your business will be in the next few months to the next few years. Include measurable goals and results. The right plan will include specific to-do lists with dates and deadlines. Failure to plan will damage your business.
The solution is to ensure you have a proper business plan. There are coaches and many online resources that will show you how to set up an effective business plan. Don’t scrimp on this – it is vital!
Engage the services of a good accounting firm. Most businesses fail purely through poor financial planning and management. From the outset we at Ratio Accounting can assist you with correctly setting up, structuring and implementing a financial plan that is tax compliant, effective and puts you in line to cushion failures and for more profitable outcomes.
Ratio Accounting has partnered with reliable companies, so that together, we can help our clients grow and overcome challenges. These companies include a business coach, leadership development and HR services. For more info on these companies, please contact our office.
We hope this article on why businesses fail and how to avoid it – part 1 has been helpful. Contact us to learn more and keep reading – this series can help not only start-ups, but those who just need to get back on track!