SIX COMMON REASONS FOR BUSINESS FAILURE
There are a million ways to fail in business. Very occasionally circumstances conspire to destroy a brilliant, well executed idea. Most failures, however, tread depressingly familiar ground. More often than not it is the judgement or character of the principal that is at fault.
1. You are under capitalised
From an early age we are all taught the importance of living within our personal means. In many ways the same is true of business. But not always. Failure to borrow enough may mean a business is always struggling, always on the back foot, always cutting corners and unable to grow. It also turns any sort of crisis into a potential catastrophe. Moral: plan ahead, realistically assess the needs of your business and borrow accordingly.
2. You over value your business
Entrepreneurs are almost by definition optimists. Many perfectly good ideas are scuppered right at the outset however, by over valuation. Potential investors tend to shy away from fantasists. They prefer level headed realists. Experts advise that you keep your numbers realistic and demonstrable. Reasonable valuations and projections make funding far easier to acquire.
3. You know better than the market
In the film Field of Dreams, Kevin Costner heard a voice saying "Build it," (a baseball field in the middle of nowhere) "and they will come." The same is not always true in reality. Experts suggest asking yourself searching questions such as who will use this? Why? And what happens if they don't want it? And remember, just because they wanted it and bought it last year, doesn't mean they will continue to do so.
4. You fail to understand your own strengths and weaknesses
Bad news. You're not perfect. But do you really understand in what ways? Unless you do, you cannot focus on your core competences. Worse still you will not be able to hire the right people to compensate for your inadequacies.
5. You travel first class
Costs are like buddleigha, they grow anywhere and everywhere unless subject to constant vigorous pruning. It's a danger particularly for new businesses doing well on the upswing of the economic cycle. Business is so good why would you be mean? The answer soon reveals itself when the boom goes bust and income starts to shrink while outgoings continue to grow.
6. You surround yourself with yes men
It's your company. You are the boss, why should you have anyone on board who is not completely behind the project? Well yes you need enthusiasm, but you also need honest professional expertise. If you are blind to the possibility of failure or have a tendency to regard those with unwelcome news and views as enemies, you will remain in a permanent state of bliss – right up to the moment the bailiff calls.
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