Some of you may have heard of a saying that approximately half of new businesses fail within the first 5 years. That’s the statistic, according to many sources that had conducted such research in the past. I don’t think that many people consider failling when they are starting a new business, otherwise they would not go ahead with it in first place. But equally not many of them are thoroughly prepared for the worst case scenario. They may say to themselves ” what’s the worst that can happen? If I fail, at least I know that I’ve tried”. That’s great if you are only testing the waters and aren’t particularly passionate about the new business idea, or if you are just a very brave and adventurous person who can pick oneself up after each knock down. But what if it’s your dream, something you’ve been working towards so hard? We, as humans, are so adaptable, but resilience doesn’t come as naturally to everyone, so when we experience failure we are usually reluctant to do it again. It’s the fear to fail and the lack of self confidence that will stop you from succeeding. So how about really giving it a go and equiping yourself with the best fail-proof plan possible? By studying the primary reasons for small business failure, you can learn valuable lessons that will allow you to position yourself for a greater likelihood of success even after a knock down.

So here are the main reasons why businesses fail:

1. Not meeting a market need. The number one reason for small business failure is offering a product or service that no one wants or needs. You really have to do a lot of work identifying the need for your business before starting it.
2. Cash flow problems. Poor cash flow management can be detrimental to your business. If you don’t have your books organised, if your projections aren’t realistic or your business is growing too rapidly you will soon run out of money. It is vital to have a cash reserve for the unforeseen scenarios. You should have at least enough cash in a bank account to cover two to three months of operating expenses.
3. Not having the right team. Your workforce is the driving force behind your business success. You may have the best product or service, but if you don’t have the right people to deliver it, your business is destined to become a sinking ship.
4. Being run down by competitors. Keeping an eye on your competitors, being creative and flexible is crucial for keeping your business going. You should never rest on the laurels and instead try to be one step ahead of your competition.
5. Having your pricing wrong. If you price your product or service too high you will push away your customers. If you have it too low, you can’t generate enough profit. It is not easy to know how much you should charge, especiallly if you’ve nothing to compare to, but it is definately worth your while spending some time and careful thought in determining what is the right price for your business.

“Failure should be our teacher, not our undertaker. Failure is delay, not defeat. It is a temporary detour, not a dead end. Failure is something we can avoid only by saying nothing, doing nothing, and being nothing.” – Denis Waitley