Many entrepreneurs face difficult challenges when it comes to starting a new business. Chances are if you’re reading this blog post you’re definitely one of these people.
If you’re to think about the challenges in starting a small business or the rate of small business failures out there, you may never get a business to call your own.
Fortunately, you can overcome all these challenges and start your dream business by following simple tips I’ll be sharing with you in this article.
Small Business Failure Statistics You Need to Know
You might be wondering why I’m starting with the small business failure statistics and not how to overcome the challenges. You’re very correct, but I didn’t mean to scare you with the figure. I just want you to know the source and that it’s really not a make-up figure.
That said, below is a brief pictorial representation of the small business failure statistics:
Why Small Businesses Failed?
Although you’ve seen the statistics above what you’re probably interested in is the cause of small business failure.
You’re right, you need to know so you can learn from their failures and start your own business the right way.
4 Common Reasons For Small Business Failures
According to Investopedia, there are four most common reasons for small business failure and these are as follows:
- Lack of adequate capital.
- Poor management.
- Poor business planning.
- Unrealistic marketing budget.
All the factors above are just the common challenges small businesses face. But there are still many more reasons why many small businesses will never see the light of the day.
According to some researchers, here are some other reasons why many small businesses failed:
- Lack of market for the products and services.
- Lack of competent manpower.
- Inability to cope with the competition.
- Inadequate product offering.
- Inadequate marketing strategy.
- Poor customer service.
How to Overcome Small Business Failures
Now that you’ve known what challenges to expect as you’re starting your new business, how do you make sure you overcome these problems?
To avoid failure, you must be ready to put in place measures to face the following challenges:
1. Making Provision for Adequate Capital
One of the most common problems many small businesses face is inadequate capital to run the business. As you’re planning to start your business consider various credit facilities options you need to access to augment your business financial needs.
But also remember that one of the things that make accessing loan facilities easy for a business is to maintain excellent credit-worthiness. It’s very important that you remember this as you’re thinking about applying for loan facilities.
Another thing you also need to consider is the rate of interest attached to the loan you’re getting for the business. Always consider loan facilities with the most reasonable or low-interest rates.
2. Having Qualified Management Team
How you manage your business will determine the level of success you’ll make. And to have effective management, you need to hire top talents to form your management team.
However, attracting top talents require more cost, resources and high brand recognition. All of these may not be easy to go by as you’re starting out.
Fortunately, there is a way to go without having to spend to the roof. By applying the tips below, you can get the top talents you need for your business:
- Offering a flexible work-life balance.
- Leveraging social media for your hiring.
- Offering career growth opportunities.
- Creating talent ambassador LinkedIn profile with your team.
- Creating exciting job descriptions.
- Offering attractive perks and packages.
3. Becoming Better With Your Marketing Budget
Overblowing your marketing budget can easily break your business. A good rule of the thumb is to not exceed your business’ revenue. Now you might want to ask exactly what percentage of your gross revenue should you spend on your marketing and advertising?
Now you might want to ask exactly what percentage of your gross revenue should you spend on your marketing and advertising?
According to the report given by the Small Business, The U.S. Small Business Administration recommends spending 7 to 8 percent of your gross revenue for marketing and advertising if you’re doing less than $5 million a year in sales and your net profit margin – after all expenses – is in the 10 percent to 12 percent range.
Above all, you should try to get most out of your marketing campaign by first identifying your goal, ideal market, distribution method and the marketing strategy that work best for you.
4. Making Adequate Planning
Every business needs a written business plan to achieve its goals and yours must not be exceptional. Whether your plan is to set a direction for the business or decide on future growth, having a plan to measure your business goals or success is the best way to go.
When setting your plans, consider both short-term and long-term goals and put in place realistic measures to achieve them.
5. Having Positive Attitude
I know you’re already wondering what does a positive attitude have to do with starting a business. But believe me it really has a lot to do with it.
In fact, it can help out businesses in a lot of ways. Sometimes when you face difficult situations in your business, what you need to overcome it is just a positive attitude.
Positive attitude help reduces stress, enhances productivity and keeps you healthier in the business. Whereas negative attitude weakens your confidence, paralyzes your performance and your mental skills.
As you’re set to launch a new business, start with the right frame of mind and use the tips above as your best arsenal. You’ll definitely overcome any small business failure you’ve ever heard of.
Related Article: 5 Lessons I Have Learned About Starting a Business