Know The Risks – Why Businesses Fail
It’s a fact of life – business is risky. It is virtually impossible to guarantee success with perfect certainty. There are simply too many variables to be able to plan for every eventuality. This is especially true for new business owners who lack the experience to predict what sort of challenges they’ll face – that’s why most small businesses fail in the first two years. Knowing the biggest risks to your business in advance can give you the understanding you need to plan for those threats and meet them head on when they arise. By planning for the most likely threats, you position yourself to deal with them directly and rapidly, which can mean the difference between a successful business and a failed one.
Far and away, the number one threat to your business is simple lack of knowledge. The more data you have about your industry, your market, your location, and business practices in general, the better equipped you are to respond to new threats and embrace new opportunities. There’s no shame in lacking knowledge – nobody is born knowing everything – but be aware that there is always more you could know, and take action accordingly. Reading business blogs like this one is a good way to increase your understanding of general business practice, and there is a wealth of information available on the internet from both government and private sources to help you answer specific questions as they arise, but there’s really no substitute for learning from a genuinely experienced mentor.
Another common risk – lack of access to the tools you need to get the job done. If you’re a mechanic, you’re not going to get very far if you don’t have a wrench available, no matter how much you know about the business. Similarly, if you’re in business online, you’re going to need website tools, email marketing management programs, hosting, and similar tools to maintain and grow your business. Without the right set of tools, you’ll be helpless to protect your business from competitors and unforeseen circumstances, and you’ll be unresponsive in the face of new opportunities.
Businesses that offer products or services that are simply not needed or wanted by a sufficiently large segment of the population are also likely doomed to eventual failure. It doesn’t matter how great a deal you’re offering or how advanced your marketing machine is, if people don’t want what you’ve got – or can’t be made to want it – you’re simply not going to survive in the long run. You should be looking for a product or service with nearly universal application to ensure the widest possible market into which you can reach.
Poor location has doomed many a business. You’ve probably seen a building near your neighbourhood that has a new business tenant every year or so. If your business isn’t in the right location, people aren’t going to find it and aren’t going to patronize it. This is an area in which internet-based businesses have a major advantage – you aren’t limited by geographic location, so the ability of your business to draw customers is going to depend much less on location and more on the tools you’re using to promote the business as well as the universality of the demand for your product or service.
Finally, lack of operating capital can do in even a sound, well-managed business model. You should be looking for a business that you can run within your existing budget of available capital – with few exceptions, it usually takes several months or even years to build a business to profitability, and you need to be able to run the business up to that point without breaking the bank. If you’re spending 200 dollars a month on a business venture, that’s far more sustainable than spending 20,000 (unless you’re making well over 20,000 a month, in which case you probably don’t need much advice). Be sure you have the resources to be in it for the long term, and choose a business that fits those resources and gives you a comfortable cushion to absorb some losses while your business builds up to speed.
This is a good starter list, but every business is unique, so always be thinking about other potential risks to your specific business opportunity and then have a plan in place to address them before they become critical. Don’t be afraid to look for other, more experienced business leaders from which you can learn, either second-hand (as through blogs like this) or direct mentoring. Don’t wait for problems to come to you – being alert and prepared to deal with the threats your business is likely to face is one of the surest ways you can increase the odds of your business surviving past those critical first few months and reaching into a sustainable, profitable future.