Primary Causes Of Small Business Difficulties And Small Business Failure
"Fear melts when you take action towards a goal you really want."
Robert G. Allen
There are seven main reasons why small businesses fail or struggle:
1. Lack of a Marketing Strategy and Plan
Many small businesses think that providing a good product or service, having a website and advertising in
the Yellow Pages is enough. This may seem to work for them in the short-term but eventually Sales growth begins
to decline as they fail to attract new customers (or even retain existing ones).
Without a Marketing Strategy or Marketing
Plan a small business may be on the journey to business failure because it cannot ensure it
maximises its potential for growth or that it gets a real Return on Investment for it's marketing
2. Insufficient focus on detailed Cost Management
Most small business owners focus all their attention on Sales with little or no consideration given to
As a business grows, so do it's expenses usually both in cost of goods and overheads. If insufficient
attention is given to costs, profits start to fall - even during a growth phase.
managing your costs is a vital part of survival for any business.
3. Employee Performance Issues
As a business grows, many small business owners find that they become increasingly frustrated with their
Unless you build a solid foundation for managing your employees, the above issues only get worse as your
business continues to grow. In the end, this will contribute to your business entering the Decline phase of
your Business Life
Cycle and running the risk of business failure lot sooner.
As soon as your business requires more than one person, you need to begin to put an
Employee Management System in place that will grow with your business and support your
4. Reactive Cash Flow Management
During the growth phase, small businesses typically find they struggle to maintain cash flow. Often their
customers owe them more than they owe suppliers, but there is never enough money in the bank to pay wages and
suppliers when necessary. So the cycle of juggling supplier payments and making debt collection phone calls
repeats itself week in and week out. Additional cash flow impacts of hiring new employees or purchasing
additional assets is also often not considered.
Reacting to cash flow issues as they occur, rather than planning for them adds a significant load to the
business. The time spent in dealing with angry suppliers and chasing money from customers takes time
away from focusing on the survival and growth of the business.
Unless a Cash Flow
Management system is put in place, the cycle of reacting to cash flow issues will never be
broken and the survival of the business is put at risk!
5. Insufficient business knowledge of the owners
Most small business owners do not have any experience at running a business and often under-estimate just
what that involves. "We will learn as we grow" is the common attitude.
Soon enough they discover that getting on top of Bookkeeping, Wages Laws, staff problems, marketing,
business expansion, cash flow etc. is more than they can manage and their business begins to suffer.
It takes an awful lot of knowledge and experience to run a successful business. The time it takes to learn
it all can be daunting and a failure to grasp the basics can significantly increase the risk of business
Finding an experienced business
coach to guide and advise you along the way can offset this lack of knowledge and help your
business on the path to success!
6. Inefficient Business Processes
The establishment of processes in a business usually start off small. Manually written quotes and invoices
are a good example. Things also change as a business grows and what used to be "in someone's head" needs to
become more formalised as the volume of work increases. What worked well in the past may no longer work
well in the future.
As a business grows, processes need to be reviewed and improved to ensure overhead costs and problems are
kept to a minimum and don't put your business at risk of business failure.
Improvement needs to be targeted to ensure you get a quick return on investment and support
the growth of your business!
7. "Tactical" rather than a "Strategic" approach to the business
Most small business owners are focussed on the daily issues of running their business, reacting to problems
as they occur. This causes their dreams and vision for the business to be put on hold for a later day.
With no strategies in place to guide them, they lose sight of the bigger picture and put the survival
of their business at risk.
Strategic Review will let you sit back and take a realistic look at your business and develop
a realistic Business Development Plan that will ensure your business survival by helping you target the areas
of your business that need it most!
Most small business owners recognise the above issues, but fail to act on them! Why?
Believing that no-one can understand their business as well as they do,
rather than believing there is someone who can bring a wealth of
knowledge and experience with them, understand their business and share their dreams
Thinking getting help is an admission of failure,
rather than acknowledging that they cannot be an expert in everything and that there is help
available to support them
in the areas they are struggling with
Thinking they can fix things by themselves,
rather than admitting they haven't been able to fix the things they wanted to in the past and the
Seeing getting help as a cost rather than an investment,
rather than seeing the potential return for their business
Having had a bad past experience getting help or know someone who has,
rather than learning from that experience and being sure they get the right help they
Want to know how to achieve true business success?
Why not call us on 1300 406 069 to find out how our small business
coaching and consulting services can help your achieve your dreams, or simply use our online contact