Of late, a lot of businesses have been going down, mainly due to the pandemic. Not many companies were prepared for what 2020 brought, especially small businesses.
Research shows businesses collapse within the first year of starting, and only one in 3 companies survive ten years in operation.
Below we highlight some of why this happens and what you can do to avoid some of the mistakes that might cause your business to fail.
Starting a business just to fend yourself and your family
Most small business owners start a business to fend for the family instead of starting a company to grow and scale it. This causes many people not to keep tabs on the finances and have discipline towards managing the business finances.
Such companies are not going to outlive their owners as they are built to provide daily sustenance.
Most millennials nowadays start businesses due to the high unemployment rates in Kenya. This results in more people starting businesses not out of passion but to make do. This results in people making so many mistakes early in their businesses. Even if the passion and knowledge come in later, many mistakes might have been made to a point where the company cannot be salvaged.
Lack of originality
People nowadays start businesses because a certain venture is said to bring success. Most people do not highlight the struggles they go through before building that successful company. And so someone looking in from the outside will only see the wins, and so when the issues start manifesting, they are not equipped properly for these. And so the company just fails.
Before starting any business, you should familiarise yourself well enough with the industry you are venturing into. Knowledge comes in handy when building a successful company.
Lack of proper knowledge and expertise
Most people tend to ignore the part where they have to do extensive research before starting a business. You need to know the dynamics of the company in and out. You need to have established all the crucial aspects such as what the business entails, How the market dynamic is for this particular business, what risks you are likely to encounter on your journey, as well as the licenses, compliance certificates, and basically everything you need to have to register this particular business.
You should also know when and how to scale your business if it grows into a successful company.
Of Course, it's a learning journey, and you cannot know everything at once, but ensure you understand the critical things that will help you when starting.
Lack of Financial discipline and literacy
Most people do not have financial discipline, especially small business owners. Most of these businesses have to be funded from the owner’s pocket before they are self-sufficient. Business experts advise that one should have capital that can last up to 6 months. This ensures the business has a safety net when it comes to capital.
Additionally, one should keep both banking and non-banking lending institutions close for ease of getting both short-term and long-term credit that will help you grow your business.
Create a relationship with your clients
Customers are the best people to show you what works and what doesn't. A good entrepreneur should listen to the clients. One way or another, they will tell you what they want and what they don't get from your business. Customer feedback is the best way to know what you should improve on. Most people only see the money and do not listen to the clients. Eventually, the business might fall as you have not been paying attention to some of the details.
In summary, when looking to start and grow a successful business, you should think about the whole process. Try starting a business that solves a problem rather than just starting one to make money. A company that offers value is in a position to grow and scale and outlive even the owner.