The fundamental part of overcoming business failure is rooted in the mindset you have. It begins with a flexible and positive attitude and a willingness to change. Winston Churchill stressed this vital factor, saying,
“To improve is to change; to be perfect is to change often.”
Failure is a part of life, and that includes business failures. How we deal with failure determines whether or not it ultimately leads to success. To be an entrepreneur is to fail. All entrepreneurs fail. It is the harsh reality of entrepreneurship. Entrepreneurs might fail before they even begin. The task of starting a business is just too enormous. Some entrepreneurs might fail within the first few weeks or months. While other entrepreneurs fail within the first couple of years.
Ways to Avoid Failure as an Entrepreneur
The risk of starting a business leads most people to quit before giving their million-dollar idea a shot. Obstacles and road bumps constantly arise to deter an entrepreneur’s success. Life savings, years of dedication, and close relationships can be lost over a failed venture. Listed below are some easy ways to prevent your business from failing:
Carry out a SWOT Analysis
A SWOT analysis includes your strengths, weaknesses, opportunities, and even threats. To do this efficiently, you need to identify any areas in your business that are working, as well as the areas that are not. Strengths can be any internal factors that help your business to function. It could include your team, any equipment that you have, or even your business location. When you have taken the time to write those down, you then need to focus on your weaknesses. This could be your marketing strategy, the fact that your business is unable to make sales, or even the amount of rent you are paying. When you are aware of your weaknesses, you can then take actionable steps to deal with them efficiently.
Your opportunities will come from external factors, but they will represent the good prospects that you have for the future. The more that you can capitalize on these ventures, the more efficiently you can get your business back on track. Lastly, you have threats. These can be external factors, but they can also include internal factors as well. When you have all of this information, you can then begin to really delve into the finer aspects of your business, and you can also give yourself a good understanding of what could bring your business down in the future.
Your business can fail if you don’t possess quality management skills. Whether it’s about financial aspects or man management, poor administration impairs the entire process. Eventually, the overall aesthetics of the business gets affected due to bad management.
Here’s how you can make the best use of management skills:
- Make good management decisions
- Have the vision to lead your organization
- Hire the right people to delegate responsibility
- Supervise staffs regularly
- Resolve critical issues quickly
Management of a business encompasses several activities: planning, organizing, operating, directing, and communicating. Do these things methodically to prevent business failure
Create a Company Culture
As the leader of an organization, you can set the stage for your employees. Reward your employees’ ingenuity by allowing them the time and freedom to pursue relevant interests. Your actions and behaviors set the norm for a small organization. ‘Do as I say and not as I do’ doesn’t apply to entrepreneurs. Know your best practices and set processes throughout the company to achieve optimal performance in all avenues.
Have a Positive Mindset
Running a business isn’t easy and making it successful is even more difficult. Studies have shown that 50% of businesses fail within the first four years. If you don’t want to become another statistic, then having a positive mindset is crucial. You also have to remember that even the most successful businesses have faced failure on more than one occasion. If you are struggling to see the light at the end of the tunnel when it comes to your business, then use success stories to empower your mindset. There are so many entrepreneurs that you can use as inspiration and when you do this, you will soon find that you are not alone in your business failure and that it is more than possible for you to get things back on track.
Adopt a Forward-Thinking Attitude
Before you plan out your business, start with a vision. Write the vision down. Use it as a map to create your business plan. Even if you’ve already started your business, you can still look ahead. What outcomes do you want for your business? Where would you like the company to be in the coming months and years? To help you decide, your vision could include:
- Your mission statement
- The products or services you will offer
- Your business niche
- Ways to find prospects
- Marketing strategies
- Problems you will solve
- Ways to position yourself against your competitors
This list is not set in stone. Your vision could be as large or as small as you want it to be. The important thing is making it workable and achievable.
As you successfully devise a plan, you feel quite confident about the proceedings. But that’s not the end of it! Failure to adapt to market changes and technological aspects can affect business greatly. So, what to do when there is a lack of performance monitoring? Try these to resolve the issue:
- Review your services regularly
- Be reactive to competition
- Clearly, define your value proposition
- Gather relevant data
Ask yourself the following:
- What’s the value I am providing to my customers?
- Do my services connect with what has been promised earlier?
You should constantly evaluate the process to ensure you’re meeting the business goals.
Maintaining and Managing Cashflow
Maintaining cash flow properly is the crux of your business. Without this, your business cannot survive for long. Even the most profitable firms find themselves in deep water when the outflow is more than the earnings.
If the cash flow becomes consistently negative and the cash is used up, then the problem becomes even more serious. The main causes of cash flow problems are low profits or massive losses, excess spending on production capacity, holding too much stock, allowing customers too much credit, overtrading, and seasonal demands. Without consistent cash flow, your business will eventually dry up and die. You need to have money coming in, or you won’t be able to pay expenses. First, have a cash flow forecast so you know what money is coming in and out. Remember, this is only a forecast, but it will give you an insight into your financial future.
Use the forecast to project likely sales and expenditures (including cash transactions) so you know how much you’re likely to have in your bank account. Other aspects of managing your cash flow efficiently include sending out invoices on time, taking deposit payments in advance, paying bills on time, and promptly following up with customers who fall behind on payments. If implemented properly, these can help you manage the crisis quite effectively.
How to Prevent Your Business from Failing?
Experience shows that following times of growth, a subsequent reversal in fortune can result in widespread business failures How could a business protect itself? Here are some simple steps that should help any business stay afloat:
- Review your fixed business costs to determine whether they can be lowered by a reduction in services used and rendered.
- Examine inventories and make reductions wherever possible.
- Try to pass on price increases quickly if the competition permits this.
- Accelerate debt collection. Collection efforts should start immediately after the due date and not 30 or 60 days thereafter.
- Reduce debt as much as possible and defer additional borrowings.
- Try to anticipate changes in business activity by performing trend analysis of your financial statements.
The Bottom Line
Having a failing business doesn’t mean it’s the end of the road. You will encounter obstacles along the way, but you will also find ways to overcome those obstacles. Someone somewhere has gone through the same trials you face. Learn from their stories and use your own story as a lesson for improvement and business success.
We, at Riz and Mona Consultancy, are always here to help you with your business needs. Our advisors can give you customized; tailor-made solutions according to problems. Contact us today to book your appointment.