In a world and generation where investing has become a very common conception and practice, there are many more people getting into the act with little or no preparation. It is unthinkable that anyone, in his or her right senses will venture into a business, spend time and money, exude energy and maybe even get others involved while planning to fail. No one plans to fail, but at the same time, too many people who are out there starting and running businesses do not plan to succeed either. And whether we like the sound of it or not, the absence of definite preparation and a plan to succeed mean a lot. It means too much to ignore. In any case, the hundreds and thousands of investment ventures that have failed and even those which are at the brink of failure are a testimonial of the fact that too many people need to learn what it takes to prevent investment failure.
Whether you are about to start a business or you are already into one, you need the following tips to guide you in the right steps so you can successfully prevent business failure. The reasons why most businesses fail are not always as clear as they should be. There are obvious causes of business failure and almost every business man who starts out will know them. Unsuccessful business however usually have one thing in common. Most of them were run by people who knew the reasons for business failure but failed to make preparations against them. Some businesses that have failed could still have been existing if the following tips were known and followed. As we look into some of the reasons why most businesses fail, lets do so from the standpoint of the solution rather than the problem.
Start with a defined statement of purpose
Too many times businesses fail because there is no purpose for their existence in the first place. The absence of a definite clearly stated purpose for existence is one of the causes of business failure. Unsuccessful businesses usually have no clear purpose. Without a definite purpose for the existence of a business, it will be difficult for it to move from one stage to the other. But it will even be more difficult for the business to actually prevent or deal with some of the challenges that may come up. Thats because, the first part of preventing a problem is identifying it. Usually, when a business fails, it is as a result of the fact that some issues went unnoticed. Purpose defines challenges that have to dealt with. There are things that could take your attention when in reality, if the business had a definite purpose why it exists, those things will not even be a problem. So first, purpose determines the kind of challenges you should give attention to and the magnitude of attention to be given.
Secondly a definite purpose is very important for focus and consistency. Businesses have to focus on particular projects and assignments. Opportunities always come and sometimes it is tempting to get involved in things that only divide the focus of the company and make it even more difficult to stay on track. One of the reasons for business failure is the fact that businesses sometimes get to a place where focus is lost and the entire company is simply trying to make profits. For example, a company that was started to manufacture male shoes may get into making female shoes without properly analyzing the market or going back to consider the purpose for which the business was started. Remember that successful businesses are about bringing solutions to the problems that people face in the form of goods and services. When you switch from your main point of focus to another target or objective without having a problem you are trying to solve, the business will simply be putting resources in the wrong places, costing it dearly. It may take some time but the business will eventually go down if this kind of problem is not solved.
Some businesses that have failed went into expansion before counting the cost. Business expansions that do not tie with your purposes should simply be considered as mere distractions.
Learn to bring in the right people
Those who work for you have great influence on the business and no matter how insignificant some of their positions may be, the right people have to be chosen and brought in. One of the most obvious reasons for business failure is building a team that is made up of the wrong people. The only criteria for bringing people in to work for the business should be competence. That covers many things. Never allow affiliation and misjudgments come in the way when you employ people. People are competent at different levels and those you hire today will determine where the business will be tomorrow, whether it will be bustling with success or creeping to failure. Higher the best you can afford and make the necessary efforts to keep them. Determine the process through which employees will be selected and retained or let go of if necessary. Many causes of business failure can be avoided or dealt with if business owners and managers learn to pay the price necessary to bring in the right people.
The right people always make the difference between business success and failure. With the wrong people, things can go wrong so quick that you will hardly be able to even know when and how it all happened.
Trust the team
A great team that is not trusted by the leader or entrepreneur is a disaster waiting to happen. Those who are confident of having the right people cannot afford to limit their ability to operate within the business by failing to delegate responsibility. Some entrepreneurs and managers cause businesses to fail because of an overwhelming desire to be in charge of everything. The main reason why you pay people to work for the business or company is because there is indeed a need for them. When you bring them in, give them the opportunity to do their jobs instead of trying to be in control of everything. The very fact that you hired them is proof of your inability to do everything. There is a place and a time when you can bring in pieces of advice as a manager, but understanding the limits of this responsibility could sometimes make the difference between success and failure in a business. One cause of unsuccessful businesses is the refusal or reluctance of leaders and mangers to delegate responsibility.
Workers, especially departmental heads who are given the opportunity to take responsible usually feel a need to prove themselves worthy of the privilege. They will definitely be more enthusiastic and committed to their responsibility. On the other hand if you always have to come in on every step they take, they will feel unneeded and unwanted. This will definitely affect performance negatively and may lead to failure in the future.
Set reachable goals
Goals are the target the business aims at achieving within a specific time frame. Purpose without goals is a fantasy. Goals bring possibility to purpose. In the same light, goals without time frames are immeasurable in the long run. So there are two main aspects as far as goals are concerned. Properly handling these aspects could make the difference between successful and unsuccessful businesses. Some reasons for business failure cannot be avoided without setting definite attainable goals.
First for goals to help you prevent business failure, they must be reachable. That means your goals must be agendas that can actually be reached or attained. One of the causes of business failure is the fact that out of ambition, some entrepreneurs set goals that the business is not ready to attain. Look at the prospects of the business and determine if your the goals you set can be attained. Sometimes it is easy for people to set goals that are too lofty for the business to realize within the set time. This brings us to the next issue of concern.
Goals that are reachable have to also be measurable. This is where the issue of time comes in. You should know that goals are not always attained exactly as planned, sometimes they are not even met at all. Setting a time frame for attaining gaols will help you determine how well the goals have been attained by measuring the amount of work done towards its realization and the time spent against the originally determined time frame allocated for accomplishing that goal. This is very essential for keeping things in perspective because it is easy to forget what the team is chasing as daily challenges show up. When people loose sight of goals, it is not going to be long before things begin to go wrong with the business.
Again, bear in mind that there are long term and short term goals. Long term goals will normally cover a few months or years depending on what the business hopes to achieve. Short term goals are pieces of long term goals that make the bigger picture easier to see and achieve. In order to prevent business failure in the long run, managers and entrepreneurs have to be experts at setting long and short term goals. As far as preventing business failure is concerned, it makes a great difference what types of goals are put in place, the relationship between those goals and the purpose of the business. In trying to prevent business failure, you cannot simply follow passions and a desire to make profits or solve problems. You need a definite target to succeed.
Never ignore planning
When goals are determined, the next thing that should come in place to prevent business failure is a winning plan. Proper planning will be of great importance in avoiding the causes of business failure. Unsuccessful businesses can usually trace their blunders back to improper planning or no planning at all. Let’s say the goal of a business is to build a house. From the time of conception of that goal to it’s realization is a much needed bridge called a plan. Without a plan, goals may only remain conceptions that will be of no benefit either to the business or its target market. Now you know WHAT you want to achieve, it’s time to determine HOW you are going to achieve it.
Plans have to follow through on goals on paper so that they bring them to realization even before they are physically visible. The winning plan is the one that takes all aspects of attaining the set goals into consideration, carefully mapping out the various steps that will be required for things to go through successfully. Since planning has to follow through on goals, it is necessary to also differentiate them into long and short term plans. Like goals, long term and short term plans have to be defined. It will take plans to meet goals so as you look forward to achieving them, pair long term goals with long term plans and short term goals with short term plans.
Never take loans if you can help it
Taking loans may be a necessity for a business at a particular stage. You may require it to either start up or take the business to the next level. However, it is better you never borrow at all to start or grow a business. The possibilities of a debt ruining a business are quite limitless. Being indebted may even make it very difficult to recover if a business fails.
Business men could have great plans and see wonderful possibilities for a startup or expansion for the business. At such times, the temptation to borrow in order to see things through could be very high. Be advised, the best thing you can do when it comes to expanding is allowing the business to grow to the level where it can sponsor its own expansion. That way, as the business makes progress, it is able to face the challenges that could come up.
Make regular assessments
Before failure comes, you can see the signs of it if you are conscious and cautious. But usually, being conscious also means making checks and assessments from time to time to ensure that everything is heading the right way. Trouble may be brewing up in the financial department and without regular assessment you will only know it when the business is about going down. Most businesses fail because regular assessment is never considered, let alone done. That is why large companies pay a lot of money to auditors for monthly or yearly checks. To the uninformed person, this would sound like a waste of time and resources. But those who do it know exactly why it is important and you should too.
Beyond financial assessments is assessing your attainment of goals and objectives. For any business to achieve it’s goals, there must be moments of assessment of those goals and their level of fulfillment at every stage. It helps the business stay on track to pursue the things that are really important. Regular assessments of goals and projects is the only way business men and their teams can rightly judge whether or not things are moving according to plan. Else the goal may be seriously out of schedule and no one will take note or take it serious until the full time allocated to the project is passed and nothing it is done.
This is important because failure in the long run begins when tasks or goals are not realized within the appropriate time frame. Then what should be done in a month is shifted or transferred to another month until everything is totally out of control. This is one problem so many unsuccessful businesses face before falling out of the market.
Again regular assessments helps individual workers to know exactly where they are falling short of their task and what they need to do in order to catch up. Frequent general assessments encourage personal assessments which together help the business avoid failure whether in the short or long run.
Build lasting relationships with your customers
I could take one look at the way you deal with your customers and know whether or not your business is going to crash. Customers are not tools with which businesses fit things together to make profits. Neither are they a means to an end. Satisfying customers is the ultimate purpose of any true business. But to successfully do that, the business needs to put in effort to developing a great relationship with it’s customers. That relationship determines a lot of things which add up to either failure or success. These days, even the degree of success a business attains is directly proportional to the quality of relationship built with it’s customers. Businesses that have failed can always look back to a time when their customers received less than deserved treatment.
You must recall that there are possibly hundreds of other businesses out there promising better experiences and more satisfaction from their own goods and services which are similar. You certainly don’t want to give your customers a reason to try out the goods and services of your competitors. They may never come back to you. More so, those who find a substitute product or service more satisfying will be sure to tell others about it. And so if care is not taken, little by little the business will loose customers until finally it has few or no customers to boast of. That is definitely what business failure sounds like. From time to time, find and develop better ways of interacting and building relationships with your customer. Let every one time buyer be seen and treated as a potential customer and more so, as a link that connects the business to others.
Take advantage of your competitors
To evade business failure, every good business man or woman must learn the art of constructive competition. That is, knowing how to find and use the advantage in having competitors. Too many people treat their competitors as enemies, and in a way, they are. But there is more to having competitors than just trying to fight them off. Those who only concentrate on fighting their competitors and never learn from them may find it difficult preventing business failure as far as this point is concerned. Most businesses that have failed went about the issue of facing competition the wrong way. Competitors too are prone to mistakes and sometimes, the best way to learn and avoid business failure is to learn from the mistakes of your competitors. It is not only wiser but also safer. You have nothing to loose when you decide to learn from the mistakes and successes of others, even if it means learning from a rival. It saves you from untold pain and possible failure. Most businesses fail because those who are at the head of decision making spend resources fighting competitors but hardly ever learn anything constructive from them.
Let research help you stay ahead
The importance of research for business success and preventing business failure is remarkable. Even before a business is established, many important decisions have to be made. Decisions that will determine whether or not the business stands in the future. Some of them include where to establish the business, availability of market and rate of demand amongst other things. These things cannot be determined by guessing or assumptions. Business is not a game of chance. It has definite principles and steps that have to be followed.
There is a necessity to introduce research at various stages of a business, especially in times of transition. As much as a business needs research to start up, it is also needed to move on to greater and more engaging levels. It helps you forecast problems so you can avoid them. It also helps the business maximize opportunities, pushing the possibility of failure further away as it advances form one stage to another. You have a greater chance of evading business failure by making use of research than you possibly can without it.
The reasons for business failure or even the number of businesses that have failed may seem too discouraging. But it is very consoling to know that many more people have been able to prevent business failure and with the information above, you can too. Most businesses fail not because the problems they faced could not be avoided or solved, but because they simply did not know how to prevent business failure.