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When you’re starting a new business, the last thing you want to focus on is failure. But if you address the common reasons for failure up front, you’ll be much less likely to fall victim to them yourself. Here are the top 10 reasons why businesses fail and tips for avoiding them. The old adage, “People don’t plan to fail, they fail to plan” certainly holds true when it comes to small business success. The failure rate for new businesses seems to be around 70% to 80% in the first year and only about half of those who survive the first year will remain in business the next five years. The following are the 10 main reasons for business failure.
1.No Management experience
When a small business owner lacks the managerial skill required to drive the business to greater heights, that business is bound to fail. Building a business without the necessary managerial skills  in place is a futile adventure. An entrepreneur that wants to succeed must be able to effectively handle the employees, have good leadership skills, effective marketing strategies, a team player and good foresight. The business owner must be able to hire a good manager to run the business.
2.Bad Business Decisions
This is common to every human being irrespective of your field.  Success in business is based on being able to make wise decisions concerning your market. Most business failure are as a result of  making plans that don’t work .  Decisions based on sentiments or guess work is bad for your business. Adequate preparation and research must be carried out before all major  decisions. So whenever you have decided on an action to be implemented on your business, consider asking friends, business partners and professionals for advice. It is going to save you the stress of cleaning up the mess resulting from wrong business decision taken. “ Before making an important decision, get as much as you can of the best information available and review it carefully, analyze it and draw up worst case scenarios. Add up the plus or minus factors, discuss it with your team and do what your guts tell you to do.” – The Mafia Manager
3.Harsh Government Fiscal, Economic and Monetary Policy
This is an open killer of both big and small businesses. As an entrepreneur, you must be on guard to bulletproof your business against the ever changing government fiscal and monetary policies. Since you cannot influence or alter the government’s decisions, you must be ever prepared to swiftly adjust your business to prevent it from being hit by the adverse effect of unfavorable government policies.
4Inability to Move Swiftly With Trends and Changing Technology
It is obvious that some people hate change, some resist change while others embrace change. Change is constant, so it is either you align your business with the trend and ride to the top or you remain stagnant and eventually fold up. You must also need to constantly upgrade your technological strengths as swiftly as possible. As an entrepreneur, you must be on your toes sniffing the air for available trends and new technologies you can take advantage of. Examples of great industrial trends and technologies are computers, laptops, i-pads,  e-shops on the internet, automated accounting, e-payment and so on. Remember, trend is your friend, not your enemy.
5.Fierce Competition
Most small business owners are afraid of competition because many profitable ventures have been forced to shut down due to fierce competition. I want to let you know that even if you are the inventor of an idea, that will not stop competitors from coming in.  “In business, the competition will bite you if you keep running. If you stand still, they will swallow you.” – Victor Kiam. So your best bet is to keep an eye on your competitors, utilize every available innovative idea and make your customers happy. I want to reveal to you the best protective firewalls to keeping your competitors at bay. These firewalls are: Trademarks, Patents and Copyrights. I will throw more light on these in upcoming editions of my articles.
6.Wrong Business Location
The location of a business is such an important factor that can never be over emphasized.  Location is critical to the success of your business. Whereas a good location may enable a struggling business to ultimately survive and thrive, a bad location could spell disaster to even the best-managed enterprise.
Some factors to consider:
Where your customers are
Traffic, accessibility, parking and lighting Location of competitors
Condition and safety of building
Local incentive programs for business start-ups in specific targeted areas
The history, community flavor and receptiveness to a new business at a prospective site
7.Bad Debt
This is another reason why small businesses fail. When a business is owed much as a result of free credit line to customers that business is bound to fail. One key role of an entrepreneur is to keep an eagle eye on the cash flow. Since a business must never be short of cash and customers too must be kept loyal, the business owner must establish a certain credit limit and a fixed time from date of purchase to pay up.
8.Insufficient Capital
A common fatal mistake for many failed businesses is having insufficient operating funds. Business owners underestimate how much money is needed and they are forced to close before they even have had a fair chance to succeed. They also may have an unrealistic expectation of incoming revenues from sales. It is imperative to ascertain how much money your business will require; not only the costs of starting, but the costs of staying in business. It is important to take into consideration that many businesses take a year or two to get going. This means you will need enough funds to cover all costs until sales can eventually pay for these costs.  This business startup calculator will help you predict how much money you’ll need to launch your business.
9.Internal Fraudulent Activities
Bad employees can be a chief cause of failure of any business. When you have illegal business transactions and cash siphoning being carried out by employees at the expense of the business, that business is bound to face liquidation. So an entrepreneur must keep a keen eye on the activities of employees with respect to the business. There will be times when you will have to be abrasive, even brutal to members of your staff. Don’t worry that your people will say bad things about you because of this. They already have. But in general, try to be pleasant and accommodating. Try to please the greatest number who work for you that you can; antagonize the fewest.
10.Lack of Entrepreneurial Skill
I will prefer to call this the ultimate reason why small businesses fail. When an entrepreneur lacks the necessary skills such as leadership skill, cash flow management, persistence and self belief and so on; such an entrepreneur is bound to fail. An entrepreneur is the head and pilot of the business. Consider an airplane being flown by an inexperienced young pilot? The outcome can be better imagined. Proper planning is critical to the success of a new business. While some of the best prepared and best planned businesses still fail, an understanding of the above reasons for failure can help assess the overall success potential of a business. In planning against failure, be honest and objective, know yourself and your limitations and be prepared to really manage the business. There are many ways to achieve business success. Study the success of others, identify business role models and network with other business professionals.
John F Fowler is a business consultant, entrepreneur and youth entrepreneurship development trainer. He has produced books on various SME business start-ups . For business advice contact him on info@startabusiness.com.ng , www.startabusiness.com.ng, whatsapp +234 802 325 4577.
Monday September 11, 2017.

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