Five Major Reasons 7 out of 10 Businesses fail In the First Year

Five Major Reasons 7 out of 10 Businesses fail In the First Year

It’s often said that more than half of new business fails in the first year of their launch. These businesses don’t have to fail at such an early age. They can survive with the right planning, healthy funding and flexibility in decision making.

When people start a business and it fails, they feel terrible about the loss of their time, money and effort. And once it’s all gone, they sit down and think where they went wrong.

So how about taking a look at some major reasons why businesses fail in their first year.

1. Business Started With the Wrong Reasons

The primary reason to start a business often becomes the biggest reason of a business failure. Do you want to start a business to make a lot of money? Do you want to let the world know how successful you are? Do you think, being a business owner will help you get more time with your family?

Yes, those could be the benefits that business owners can achieve after establishing their startups in some years. However, they can’t be a reason to start a business.

Successful business owners never have those reasons to start their business. They started their business because they had a passion and love for something. They had a drive, determination, and patience to work at an idea. They wanted to turn their idea into success no matter what costs they have to pay.

If someone starts a business for the wrong reasons, they are a lot of chances that they will find quick failures at them.

2. Business Run without a Plan

Lack of planning can have grave consequences for any business, especially in its early phase. New business, in particular, should have both short and long term goals, and a solid plan to work towards them. Unfortunately, failure to have a plan is just another reason why businesses fail in the first year.

Many people make a decent effort to lunch their business; however, they lack a plan to run their business. They don’t know where they need to go as a business, what targets to achieve and how they can reach the break-even point. This is why things go wrong quickly in the very early days.

For a business to be successful, it’s imperative to have clear to-do lists, benchmarks, and milestones. In short, a successful plan!

3. Business with Insufficient Capital

A common reason why businesses fail in the first year is due to insufficient operating funds. Business owners often make mistakes of spending a lot on designing their premises, machinery and other places, leaving insufficient capital behind to run their day to day expenses. They don’t understand cash flow or underestimate how much money they need to pay for different things in the early days. In addition to that, they keep unrealistic expectations to get into profits in the early phase of their business.

The invisibility of capital is the single biggest reason why businesses fail before they had a fair chance to succeed. The failure to underestimate the costs of staying in the business forces them to close down, even when things seem to get on track.

4. Business with a wrong Location

A bad location could turn out to be a disaster even when a business has the best management team. The location of the business is critical to its success; however, not all consider that fact.

A lot of start-ups fail to keep some important things in mind when choosing their location. They forget to consider:

Where their customers are

Type of location

Traffic and parking facilities

Competitor location

Storage of goods and more

No matter how much capital you have to invest in your new business idea, and how outstanding it all seems from the inside. If it’s located on the wrong location, chances are it won’t be able to survive for long.

5. Business with Poor Management

Poor management is enough to take down a business in the first year. It’s the management of the business that is responsible for how things are going to run on a day-to-day basis. If it’s poor, all areas such as finance, purchasing, selling, production, and hiring and managing employees will be in a poor state as well.

Competent management team containing talented people is the need of every successful business. Though, unfortunately, a lot of businesses fail just because they don’t possess one.

Author Bio:

Anna Marsh is a business consultant who also specializes in writing quality content for areas related to the industry. She is associated with the reliable assignment writing service UK house that offers quality academic support to students from all different backgrounds. When she isn’t working, she spends most of her time with her twin daughters at home.



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