Why Do So Many Businesses Fail And What Can You Do About It?
It’s a fact that a lot of businesses do fail on the market, even within their first year. Indeed, one report has suggested that more than 90% of companies will fail in their first year. It’s important for new business owners to ask what’s going on and what they can do to prevent it. So, let’s dive into some of the key reasons why companies do tend to crash and burn.
Not Enough Marketing
It should be obvious that businesses need a lot of marketing to thrive. Without the right level of promotion, a lot of companies are simply going to crash and burn because customers just aren’t aware that they even exist. This is a massive issue because a lot of new startup owners don’t want to invest massive amounts of money for day one. Unfortunately, this is unavoidable and you need to spend about 20% of your total budget on marketing. Depending on your business model, it could be significantly more than this.
Failing To Manage Money
It’s also possible that a business fails purely because the owner has failed to manage spending and profits effectively. If you don’t do this, then your company will quickly end up in the red. So, for instance, you might find that you are not getting paid enough for your services. With options like shipping auction solutions for logistics companies, businesses can take far more control over how much they are paid for their services. But it’s still not always enough, particularly when it’s a buyers market.
At the very least, you should be making sure that you are using an accounting service. An accounting service will allow you to keep track of the money that you’re spending and the money that you are taking in with real time consequences. This means that you’ll never end up in a situation where you are struggling to remain profitable. You will also know exactly where you need to cut back spending and where you could do with spending just a little more.
No Demand
Finally, it’s fair to say that a lot of businesses do fail early on simply because there’s no demand for the product or service that is being offered. This is why you need to make sure that you are completing marketing research in your business model. It’s important that you do understand exactly who is interested in buying your products and how wide that audience group is. A small starting audience won’t be the end of the world. But by being aware of this problem you can make sure that you are making the right marketing push for the key demographics that will be relevant to your business.
We hope this helps you understand why a lot of businesses do fail on the market and what you can do to avoid this happening in your own model. If you take the right steps, you will be able to make sure that your company is one of the lucky ones and survives well beyond the first year.
