Reasons Why Most Small Scale Business Fail

Launching a small business can be risky and success is not always guaranteed. Businesses are most vulnerable to failure during the early years of trading, with 20 percent of new businesses folding up within their first year and 50 percent within their first three years. These figures should not scare you off, but should prepare you for some of the challenges entrepreneurs face when starting a business. With hard work and an awareness of the issues, a new business can be a great success.
This guide looks at the most common mistakes new business owners make and, more importantly, how you can avoid them.
It also shows you how to improve the chances of your business idea succeeding. Below are the 5 common reasons of business leadership failures:

1. Failure to plan

Business leaders have two major responsibilities - to look after today’s business and to plan for the future growth of their business/organisation.

Future planning is crucial if you want to take advantage of opportunities and anticipate necessary actions for growth and success. The reverse is also true - failing to plan for the future can have dire consequences in terms of lost opportunities and contribute to business failure. According to Marcelene Anderson, strategic planning specialist, RavenStrategic Consulting, preparing for the future is typically ignored because of a preoccupation with today. As the saying goes, failures do not plan to fail, but they fail to plan.

2. Selling to the wrong people

 While sales are important to the survival of any business, you don’t need to push your business on everyone you meet, including friends and family. Furthermore, it’s a waste of time to try selling to people who simply don’t need what you’re offering. Selling to the wrong people includes trying to sell to everyone.  Just because someone is interested in doing business with you doesn't mean you should accept.

3. Not carving a niche for your business

 Many entrepreneurs think that selling to the widest possible market is the likeliest path to success. They are afraid to pursue a market niche because they fear they’ll lose business by turning away customers. But this ‘take all comers’ approach is not very effective. It’s hard to stand out when you market your business without a distinctive set of prospects in mind. Occupying a niche means you won’t be competing with a lot of similar businesses solely on price. And because you will be selling products and services that are customized to the specific needs and predispositions of a select group of people, you can often charge more. Your products and services serve a market that can’t easily find alternatives.
To determine if a particular niche is right for you, ask yourself these questions:

a)  Do I have an identifiable target population with similar interests and needs?
b)  Is the market large enough to support my business?
c)  Can I tailor my products, services, and business identity to address that market’s particular needs?
d)  Is my target market currently undeserved?
e)  Can I reach my potential customers in a cost-effective manner?
Your niche will give your marketing efforts a natural and sharp focus. The more you specialize, the more your market will see the value of your services because you speak directly to their unique situation.

4. Poor and inadequate market research

 Research and planning are vital to ensure that your business idea is viable and also that your pricing is both competitive in your market place and provides an adequate return. A common misconception is that entrepreneurs who have failed simply lacked sufficient funding or did not put the right team in place.

However, many fail because they have not spent enough time researching their business idea and its viability in the market. Lack of proper market research is one of the key problems for new businesses. It’s easy to get carried away with a business idea and set up a business without testing its viability. Accurate market data will help prevent over-optimistic forecasts.

5. Hiring the wrong people

A large part of your new business’ success will be determined by the quality of the people you recruit. Taking on people will always mean some form of investment for your business and requires careful consideration. Taking this investment seriously can make it more valuable and improve your chances of success.

Ensuring that you hire high-caliber people with the right mix of skills is not an easy process but one that will pay dividends. How you go about employing new people will depend on your business needs, e.g. whether the work is constant, how long it will last and the number of hours available.

Source; Businessdayonline.com