Why Businesses Fail In Their First Five Years

Have you ever wondered why most businesses fail in their first five years. Have you ever thought of what it was they were doing wrongly? Or you are one of those who starts a business with the hopes of building something that will outlive you? You are excited to start a business, in fact it has been your lifelong dream. To own an enterprise you can call your own. It feels like you have answers to all your secret prayers already and then boom, it fails!

You are not alone. 

Running a business is not for the fainthearted. According to Forbes, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months. 

And  according to the Bureau of Labor Statistics approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first ten years. Only 25% of new businesses make it to 15 years or more. 

The numbers are not meant to be scary but eye-opening and should be taken seriously. 

Well, in this article we will be sharing FIVE reasons why businesses fail in their first five years and what you can do to prevent it.

Absence of a business plan:

Most entrepreneurs, especially small business owners do not see the need to have a business plan and this in the long run causes untold issues for them and their business. A business plan would contain: 

An executive summary

A description of the company

A list of products and services (including product pricing)

A market analysis (from your market research)

Your business strategy (how you’re going to operate and become successful)

Business organisation (the layout of your team, management, etc.)

Finances (costs and financial projections), etc. 

Having a business plan is capable of being the needed springboard for your business. It is not just words written on paper, it is supposed to serve as a roadmap for your business and should not be taken for granted. To have a well-detailed and custom made  business plan for your business, reach out to us today. 

Insufficient Funds: Most times business owners are engrossed with the “start small” mentality that they do not connect with their reality. As much as one is encouraged to start small, having enough funds to start with is non-negotiable. To be operational, money is needed

Poor management: Most businesses are run without direction. 

This can be as a result of the business owner’s lack of management skills or the fault of the management team hired by the business. Either way, the businesses take the hit of these persons ineptitude.

Inability to track funds: Cash inflow is as important as cash outflow. Businesses should at all times track aatheir spendings. This way, expenses can be controlled. 

Failure to understand the market:There is no need for a product or service if there is no market for it but most importantly, one needs to understand the market too. 

Questions like what products are most likely to thrive, how are the consumers behaving, and lots of other questions.

All the above mentioned reasons can be responsible for a business’ failure. What is it that you have been doing wrongly and what would you do differently now? 

You can contact us for your business plan to revive your business today. We are here to see your business thrive!

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Source: Forbes