Businesses fail every day, and the reasons they fail are repeated over and over again. Three of these common reasons for business failure are listed below. If any of these sound familiar to you, it may not be too late to make some positive changes and boost your chances for success.
1. You’re winging it.
There are many different perspectives on business plans. Some experts will tell you that you simply must have a formal, structured business plan. Some will tell you that planning is for the birds. The best solution is somewhere in the middle. In some cases, you do need a formal business plan — if you’re trying to land investors or get a loan, for example. Otherwise, you may be better served with a simple business plan, a working document that gives you a foundation for your business, while helping you plan out the action steps you need to take.
Regardless which plan fits your needs, you do need some kind of plan that outlines where you are, where you want to go and how you intend to get there.
It ultimately doesn’t matter what this document looks like, as long as it gives you the direction you need.
2. You can’t stop worrying about money.
Most startups don’t have access to bags full of cash. So it’s not surprising that many entrepreneurs get anxious and desperate about making money with the business and doing it fast. But here’s the thing — most small businesses do not make money overnight. In fact, most small businesses don’t make money in the first year, possibly even the first two years. You are going to need a financial plan to ease the transition to business owner.
For some, this means waiting to start the business until they have 18 months of cash reserves stocked up as a cushion. You could also start the business on the side while continuing to work full-time, get a part-time job to make up the difference during the startup stage, or launch the business incrementally as you get your financial footing.
There are a lot of options, and you need to explore them all and come up with a plan so you can put the financial uncertainty behind you. This is the only way you can approach your business and the money side of it unemotionally and avoid making bad decisions because you’re worried about money.
3. You refuse to do a reality check.
Starting a business is an emotional process, and not just when it comes to money. You are passionate about something…so passionate that you want to turn whatever it is you’re doing into a business. That means you’re already emotionally invested, and it’s going to be hard to separate your personal feelings from your business. This isn’t always a bad thing, but it can cloud your objectivity and blind you to the reality of what you’re doing.
One of the worst things you can do when starting a business is get tunnel vision and lose your ability to see the big picture. Doing this can lead you to getting fixated on the future, and lose sight of now. It can also weaken your ability to explore alternatives, try new approaches and even remember why you started your business in the first place.
Sometimes, you need to take a step back and get an aerial view of your business so you can make better decisions. If you can’t accomplish a reality check on your own, it may be time to call in a coach, partner, colleague, or even friends and family to help you take a look at what you’re doing, why you’re doing it and how you can do it better.
Being aware of these common reasons for business failure can help guide you on the right path. Take a few minutes to reflect on your business and see if any of these areas pose red flags for you. You may be able to head off a disaster with just a little conscious effort.