Everyone who is thinking about starting a small business should make a detailed business plan at the very onset. A business plan is your crucial planning tool and defence against business failure. While you work on it, you must also do the market research which is crucial to find out whether or not there is a market for your product.
The good news about why small businesses fail is that business failure because of poor planning can be completely avoided. You need to know what kinds of planning you should do before you start your small business. It is merely a matter of learning about what works and what doesn't. So it pays to never stop learning.
In the words of Robert Kiyosaki, (famous American investor, businessman and self-help author) "It is not money that makes money, it is knowledge that makes money." Without the right business knowledge you can put all your money into your business and yet never meet with success you are seeking.
Reasons Why Small Businesses Fail
Inadequate market research: Though you might really feel passionately about a particular product, you need to find out if there is really a market for the product or a service. Remember that the business is not about you, it's about your potential customers and their needs.
Unplanned finances: You must sort out the money matters before you start your small business. You need to calculate how much money you need to carry out your daily living expenses and how much money is required to run your business. You cannot ignore the demands of your new venture, and nor can you ignore your bills. If you do not have enough money at hand to finance your business, you have to organize enough money to cover all your financial needs.
Inexperienced managers: One of the main reasons for failure is inexperienced managers who do not have the experience, knowledge, or vision to run a business.
Not choosing a favourable business model: How are you going to earn money out of your business? If you do not choose the right business model your small business is sure to be doomed. Too many people rushed into selling their product or service without even finding an answer to this essential question. There are many models to choose from like direct sales model, distribution business models, collective business models, franchise, multi-level marketing, etc. You need to make a careful choice about what suits your product or service best.
Not planning for growth: People work hard to create a small businesses and turning them into successful enterprises. However, they have no plan for what will happen to their business when they are no longer able to work so hard. They are ready to sell the business, but instead, it is more feasible to find a manager or a partner to share the business with.
Dependence on one person's talents and personality: Many small businesses are centred around one person's talents and personality. All the decisions are taken by that person and the administration of the business is not decentralized. This leads to problems when the person is no longer able to play a very active role in the business.
Avoiding Business Failure
Market yourself well: Rather than marketing your general profession, focus on niche areas. For example, marketing yourself as a florist is too general. You can market ideas like specialized bouquets, marriage decoration, or exotic flowers.
Plan well: Though the planning process may seem time-consuming and tedious in the beginning, it will benefit you enormously in the future. Plan details like when you should need funding, when you need to hire professionals, when you take on a partner or investor.
Spend wisely: Do not waste money on brochures and business cards and websites as they aren't worth the trouble for startups. See if you can get a friend or a relative to design your website for free instead.
Don't promote yourself, promote your products: Everyone who comes to you has a problem or needs a thing. If you have a solution for them and you can tell them how to solve it by using you have hit the nail right on the head!
Don't give up: Don't stop marketing even though you have run out of ideas! Remember that the key to marketing is repetition and the bottom line for a business startup is staying motivated. If you keep going on you will get at least minimum results. It might be just the push your business needs to finally succeed.
Lastly, remember that businesses thrive only in environments that support business. Choose the right jurisdiction to start your new enterprise. Countries like Singapore and Hong Kong are the most preferred destinations for starting a new business due to their investment-friendly policies related to laws, regulations, and taxation, which promotes the growth of entrepreneurship.
For more information on topics discussed in this article, refer to Singapore company registration and Hong Kong company registration guides.
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