We all aspire to be that inspirational business success. Every small business hopes to be the one that makes it big. And yet we all know the truth – that for every successful business, many have failed.
It’s not always possible to tell whether a business will or will not fail. We can, however, do two things: we can identify why some businesses fail, and we can insulate our own businesses against those problems.
Here are three of the biggest reasons for business failure, and advice on insulating your business against those problems.
Reason 1: The Leadership
Leadership problems are disastrous to any business, big or small. Leaders can be too pushy or too distant, too argumentative or too compliant. They can fail to know the workings of their business, and they can fail to communicate.
Here’s how to avoid leadership problems
Make sure that roles are clearly divided at your business. The moment people are unclear on what their role is, mistakes happen.
Make sure communication is always, always a priority. Miscommunication can floor a business. Leaders need to ensure that everybody can always access the information they need, and that information flows are kept open.
Reason 2: Breakdown in Supply or Demand
Supply and demand chains can be faulty. Most businesses fail because they can no longer produce what they sell, or because they can no longer sell what they produce. Sometimes, this is unavoidable. Often, foresight and planning can make a business more stable against disruptions to the supply chain.
Have several suppliers, if at all possible. If it isn’t possible to have several suppliers at once, know where to source extra suppliers if you need them. Keep in touch with them – there is nothing wrong with dropping an occasional message to a backup supplier confirming whether they would be able to work with you in the future.
If you only have a few big clients, make sure at least some of your businesses’ energy is expended in sourcing potential further clients. An email sent to the right person a few months ago can be a lifesaver if the one big client suddenly falls through. Never become complacent. Be constantly on the lookout for new buyers.
Reason 3: Admin Failure
For small businesses especially, an unexpected tax bill or a failed insurance claim can be devastating. It can be hard, especially with a small team, to keep on top of admin. Complex paperwork can seem impossibly daunting. But with avoidable legal issues and bookkeeping errors among the largest obstacles facing small businesses, there is no margin of error in admin.
If you can’t keep on top of the paperwork yourself, employ somebody else to do it. Never let a wrongly filled-in form stand between your business and success.
You can never plan for absolutely every eventuality. Some businesses just fail, with nothing to be done about it.
But you can always build safeguards into your business plan. Insulate yourself against common problems, and it will become easier for your business to remain successful for longer.
Interesting related article: “What is Bankruptcy?“