Starting and building a successful and profitable business may be your dream. That’s why it’s important to be aware of the issues you could face that can cause you to go out of business. Knowing and understanding the issues you may face (and how to combat them) will help you prepare to do what it takes to minimize the risk of failure.
It’s no secret that one in five new businesses fail. The truth is, your business doesn’t have to fail and you can be the one that survives. The key is proper preparation. If you go in knowing and understanding the different hurdles you will need to overcome in business, you can work to develop a solution for those hurdles before you start.
Below is a list of some of the obstacles you may face that can cause you to go out of business quickly. This is not an exhaustive list and was derived mostly from my own experience in business and what I witnessed other entrepreneurs deal with.
- Ineffective Marketing & Advertising – Implementing an effective marketing and advertising campaign will help your business get the exposure it needs to grow and prosper. If you implement ineffective marketing and advertising techniques that don’t generally work for businesses in your industry, you won’t get the exposure you need to generate leads that can turn into sales.
- Lack of Customers – This one is simple, if you have no customers, you simply won’t make money. This goes back to implementing an effective marketing and advertising campaign. The key is understanding what type of marketing techniques work well for businesses in your industry. I suggest watching how your competitors, (who are successful), market and advertise their businesses and do what they are doing (but be sure to brand yourself differently). It’s good to be innovative by implementing newer marketing techniques but it’s also wise to stick to the script, especially if what you’re doing isn’t working.
- Customers Not Paying On Time – This is especially important for business owners who mostly offer services and allow customers to pay “over time.” One thing I do know about some service businesses, is that it’s best to get at least 75% of your fee upfront before the service is completed. If you don’t require a deposit or upfront fee to be paid, you expose yourself to the risk of not being paid at all. If you start having trouble with obtaining timely payments from clients, you will see your cash flow suffer. Cash flow problems is the last thing a small business needs, especially a startup. I have witnessed several of my business associates go out of business and file for bankruptcy because of this very issue.
How to Combat These Issues – Have a Backup Plan
I suggest coming up with a contingency plan to combat these potential obstacles before you start your business. A contingency plan should serve as your “plan b” if you start to experience the aforementioned issues. The contingency plan should outline the different marketing and advertising techniques you can implement if what you try the first time doesn’t get you the exposure you need to generate leads that can turn into sales. It should also outline how you will deal with customers who don’t pay on time.
As I stated before, if you’re offering a service, I strongly suggest you require some form of down payment or deposit that will cover the majority of the cost associated with the service. This could minimize the risk of business failure significantly. No matter what obstacles you may face or issues you may run into, always have a back up plan to decrease the risk of failure.