Tips on a failing business

[fayt]

There is a few factors that go into a failing business. Let's take a look at a few of them:

Poor Management: One of the main reasons a business isn't successful is due to the owner/founder/ceo. They either don't have the experience, the willpower or the attitude to manage the business.

I've started businesses I thought would be great, however I quickly thought "What am I doing? I know nothing about this stuff!" and it appeared to me why it was a failure.

If you don't have willpower, what's the point? Hating everyday you go open/run the company, refusing to pay bills, let employees do whatever they want, don't care about the business or want to be an owner. All of these will destroy your business very fast.

Attitude can make or break a business. If you are rude with your customers, chances are they won't come back again. Once you start getting bad reviews about your business, it's all downhill. Everyone has a bad day, but everyday?

Lack of Start Up Capital: Not having enough funding to start your business can be a major setback. If it costs $20,000 for everything you need, and you only have $10,000. You will have a very hard time, it means you have no working capital, you don't have the equipment you need to run your business, you can't do any advertising/marketing, etc.

Debt: This is a major cause of all businesses both small and large to go bankrupt or close. You can get into debt by having a lost of sales, too much advertising, product waste, etc. But you can also have debt from starting your business which you haven't paid off. I make a big mistake of putting most of my start up money on my credit cards. Paying 23.99% interest a month, I was never able to pay it off, so I had to switch it to a bank loan. Now it's going great. It's best to always have the cash upfront for your business and not to rely on loans or credit cards.

Supply and Demand: You have to keep up with supply and demand to be successful. If you have can't produce something quick enough and it causes the customer to wait weeks for it, chances are you lost a customer for life. Hire more employees, get new equipment, keep your stock up, etc.

Product/Service That Isn't Needed: If you have a product or service that very few people need, then you will get very little business. If you make rolls of toilet paper for $5.00 a roll, who is going to buy that? If you have a service business to sew buttons on shirts, how little will you gain from it? $2.00 per shirt? How often do you lose a button? once every few years? You need to research and study your product or service first to see if there is a market for it.

Freebies, Friends, Discounts: It's easy to go overboard on freebies. You think well I have 100 of this item, I can spare 10 of them. What if you sell 100 per week? what if it costs you $10 per item? Do you give your friends big discounts/your cost/freebies? They can use you to get a ton of stuff. What about big discounts like 75%? If you aren't breaking even then you are going in the hole. What if you have a profit of 40% on a product and accidentally mark it down 50%? You have to pay extreme attention to these details.

and Lastly,

Employees: One of the biggest causes of a business failure is the way the employees act. If your employees goof off when your not around, when they lie or steal from you or are very rude and fight with customers. What about when they spread rumors about you about how your a terrible boss? Employees can destroy your business. You need to pay really close attention to their actions, don't hire them because they are your friends, don't keep any employee close to you.

I wrote all of this, this morning while having coffee. I hope it can help you in some way with your business. I wish you all the best of luck!

[nealrm]

You forgot the most important reason, debt. It magnifies every mistake and minimizes every opportunity. It limits growth and increases stress levels.

[fayt]

Having debt to begin with is huge, but also getting into debt by operating such as a large amount of advertising. Good point I'll add that.

[Pack-Secure]

I watch a show on the food network about failing restaurants, very interesting. Sometimes it seems so obvious to us outsiders, but the people involved seem oblivious.

[DeniseTaylor]

How about lack of sales and promotion? You can have the best running operation and the best product in the world, but if nobody knows about it or buys it, you cannot stay in business very long.

[fayt]

Falls into the Poor Management category, failing to advertise is a lack of motivation. But yes that is a good one!

[webmarketingpro]

Lack of funds can make running a business a huge challenge. It's hard to keep a business afloat if you don't have the resources for advertising, and enough help etc.

Possible solutions? Some "fund raising" activities - running specials, fire sales, lots of very low-cost advertising, etc.? And making sure that prospects are turned into buyers in larger numbers right away or at least followed up with... One way to do this is capturing their email addresses and building a relationship with them (and sending them periodic irresistible offers).

[painperdu]

One of the most consistent things I see with failing businesses is the sparse involvement from the owners. It seems that they think just opening the doors will lead to success. The small businesses in my area that are doing well all have enthusiastic owners working hard as if they're scared to fail.

Many businesses start off motivated and optimistic then fail to actually work for their business. When they're hopelessly headed for failure only then do they start looking for solutions -they have it backwards.

[rave]

Great tips, Fayt thanks for sharing. These will help a lot in business on what to avoid and improve so that a business would steadily grow in progress. I indeed agree that poor management is one of the things that can make your business fail. It also would result to poor customer service.

[cgcs]

Although all are valid points, employees by far are the most important factor for a successful business. You could do everything else on the list exactly right but without quality employees you will fail.