Your Business Might Fail, Here’s Why

While we enjoy recognizing small wins every now and then, it is important that we also acknowledge small failures and address them the soonest and in the best way we can, to prevent them from recurring or resulting in an even bigger loss.

No one sets up a business just to fail, everyone wants to absolutely succeed, whatever industry he or she may be in. But it is always better to know more, especially about what risks are there and what could potentially lead to failure. You know what they say, knowing is already half the battle, and this is not far from the truth when it comes to running a business.

When you are new to being an entrepreneur or in building a business, emotions are usually high, and there is a risk of not seeing things through and to be subjective. When you love what you do there may be some critical steps which are either deemed too difficult to do or not perceived as essential, and in many angles, you may always want to do what you think is the best for the business without really analyzing clear and present dangers – without knowing that there are efforts or steps that put you at risk for failures one way or another.

According to Investopedia, data from the United States Bureau of Labor Statistics shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. This may not be the most encouraging data you will see, but this absolutely is an eye opener, don’t you think?

Now the case is no different for when you are a seasoned businessman. Even if you have been handling or running a business for a long period of time you could still be prone to failures. In fact, it is also highly likely that because you have been managing a business for so long you become blind when it comes to critical thinking and analyzing data for decision-making using both internal numbers and external factors, and emotions may still be as a huge factor as when you were new to the field.

So here goes a list of why a business commonly fails, especially in the Philippines:

Lack of Capital / Funds

Obviously, you have to stop operating when there is no longer any money to fuel your operations. And as tough as it could be, you absolutely have no right to establish or run a business if you have no money to make it run anyway. Think about the need to purchase raw materials and to employ people sooner or later to keep your organization moving. Money or capital is always a major consideration and there are several reasons why businesses fail to keep or maintain their funds. One could have miscalculated costs, expenses, and benefits resulting in unbalanced books. One may also face unexpected external changes that affects pricing and expenditure causing the sweeping of funds and assets. Fortunately, there are many sources for and channels to obtain funds nowadays. Many start up companies can avail capital from angel investors and corporate investors easier than how it was in the past. Existing companies and organizations have the popular option to avail business loans and financing, be it from banks or from private lending institutions, like Global Dominion

Poor Marketing

You may have a great product or service, but poor marketing might actually crush its quality and value. This is a common problem with very good inventors but not so good businessmen. There is a whole different world when it comes to marketing and even branding, and it is essential to not just understand how things work in that realm, but to be able to implement strategies accordingly as well, so you could hit your goals and targets in alignment with your plans. For some who may have started with a successful launch, therefore with great initial marketing strategies, finding themselves affected by reputational challenges along the way resulting in decreasing marketing performance and consequently declining sales performance, is still probable.

Bad People

Put as simply as it could be, this refers to employing or tapping into the wrong people for your team or company. Needless to say, hiring ineffective employees, be it full time, part time, or consulting, shall result in poor performance and therefore bad business. Subjectivity takes a huge part in this error – meaning if you do not look at the facts in front of you and hire for other reasons aside from skills and behavior, and promote for reasons other than performance and potential, then you could easily fall prey to this predatory mistake! As bad as it is in big businesses, this misstep is fatal to small businesses.

Unnecessarily complex models and flows

While things may be easier when you are starting your business, and you are enjoying having a bunch of people or consumers who love your product or service, the real challenges begin when it is time to scale. Expansion reveals unnecessarily complex models and flows that lead to too many inefficiencies, extra costs, and horrifying customer experiences. These adverse effects of a horrendous business structure commonly kills businesses at growth stage. While it is not bad to savor your early successes, and trust in the quality and your love for your product or service, those will never be enough to become big time! Critical thinking, analytics, problem-solving, and continuous learning and improvement are always going to be your companion especially when you are about to scale your business. The fund that you required when you were starting may not be enough for you to move up. Hence, once again, business loans and other forms of financing may be necessary.

Any of the four identified failure reasons can lead to one point – data. Knowing what you need to know helps you in preventing failure or in managing small losses until you achieve success points. Without knowing strengths, weaknesses, and other data essential to your operations, like costs and performance, success wouldn’t be possible. Making it big means making huge decisions based on facts and numbers, whether you are dealing with sales or with your people.

In a published report from Global Entrepreneurship Monitor, Filipinos’ “Fear of Failure” rate at 36.45 is higher than that of the global average which is at 35.67. This means that Filipinos could be more apprehensive about risks, therefore, it could also mean that they have higher propensity to gear up for any eventualities. This is good news! But after sufficient planning and preparation, implementation and actually making things happen is next in line – and these are no less than the knowing part, but essential as crucial.

By all means you will try to thrive and succeed, but failure is inevitable. In many ways than one, as a business owner, you will face failures – a lot of them. But that doesn’t mean that you are not on the right track or that you will never succeed – that is not what it means at all! In failures we learn so much, and we prevent many more from recurring, and so it is important that we keep our discoveries in mind and use them in future endeavors, especially in the business realm. It is never easy to be resilient and stand up after falling, but in every defeat awaits a success – a win!

For comments about this write up, shoot an email to aoguanzon@gdfi.com.ph.

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