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Top 10 Reasons Why Most Business Fail - And How To Prevent Yours From Failing

Aug 17, 2007
The statistic has shown that about 50 percent of the businesses fail within the first year of operation and almost 95 percent fail within five years. Here are the top 10 list of common mistake that the business owner made that lead to the failure of the business:

1. Lack of market research - most of the people when they running their business, focus on what they 'think' the market will want and not based on the market research that tell them what the market actually needs. It's the market needs that decide whether a product has a market or not and not the product that will create market (at least mostly). People fall into a thinking of if they create a product then the customers will come. If the product is targeting the market that doesn't has any interests in what you provide or produce, or a market that doesn't exist at all, you are wasting time and money to create something that nobody want.

2. Lack of marketing skill - Marketing is what decide the profitability of any business. No matter how good your product is, if you couldn't fully convey the benefits of your product to the prospects, communicating effectively and efficiently with them, or you couldn't reach the market that want your product or reach the wrong audience, then it will cost you a lot of money wasted on the marketing campaign and not getting the number of expected sales.

3. Lack of Cash Flow - Cash is the flesh and blood of any business, just like the blood in our body that bring us oxygen, nutrients; that keep us live and healthy. You need money to start, run and sustain a business. Without a steady cash flow, either it's through funding or from the profit that gained from sales, the sales cycle will break and then cause the malfunction of each component that form your business and eventually, collapse the whole business. Hence it's important to think a few steps away while doing budgeting so that a temporary lack of cash flow won't affect the long term business plan.

4. Lack of planning and management skill - When setting up and running a business, there are three main phase that you are going to deal with: the business setup and planning phase, maintenance and expanding phase once the business is on track. Each of this phase, you need to plan, handle and manage them in a slightly different but flexible way. Besides the project management skill, you will also need to have a good financial planning, on top of that, it is also vital that you properly communicating and dealing with your team partner or co-worker so that you and your team have the same goal and target and working toward it.

5. Lack of competition analysis - Before you decide which product to provide to your customer, not only you must do a market research to fill the needs of the market, but you must also research and monitor on your competitors! Don't treat your competitors as an enemy, but your best teacher. Learn, follow, and improve either your product quality, marketing techniques or services from your observation on the experience of your competitors to approach the market, and avoid the pitfall.

6. Lack of customer relation building - Nowadays, a customer doesn't show much loyalty or sticky to a certain vendor again as they can now easily looking somewhere for the other resources for the better and cheaper products and/or services. At first look at this consumer behavior it may seems more like an disadvantage to you, but if you think another way round, you can turn this to your advantage as this will become an opportunity to you to attract the customers from your competitors if you can provide them with better and cheaper products or solution. Besides from just selling to your customer, you need to build a long term relationship with your customer and keep them on your customer list as long as possible so that you can promote more product to them from time to time. It cost more to get a new customer than to the cost invested to keep loyal customers.

7. Lack of Leveraging - Leveraging your time and money is the single most important thing to keep your business continue to grow. Do not try to do everything yourselves, hire and delegate the right person for the right tasks. Outsourcing the tedious and less skill orientated works like customer service and support, accounting, web design/hosting and such will let you free up your time to focus on the core productivity and activities like improving the products, product development, business planning that will bring in long term benefits to your business. For a low cost of outsourcing the tedious and repetitive jobs, you will be able to get more of thing done quicker and better, and eventually, will helps you to get gain more customers and profits.

8. Lack of Focus - Many people made a mistake to spread themselves so tiny by trying to create multiple income streams: multiple products, services all at once before they even have one successful income stream that will bring them continual cash flow! You may have many great ideas that you would like to implement, but if you are trying to do them all at once, you'll spread your resources: time, money, human power on doing different thing concurrently which at the end, may consume all your budget, time, before you can start selling single one of them. Focus will on developing one core business product at a time, make it as perfect as it can so that it can continue to bring in profits. Reinvest part of the profit into developing another business idea.

9. Lack of Partnership - Forming an alliance, or a business partners will help you to reach out the customers you may not ever have if you are trying to do all the marketing and promotion yourself. The more partners you have, the wider you can reach your customers which less efforts. Leveraging the contacts and relationship of your partners and his customers, and cross promote for mutual benefits. Your partners may have products or services that will complement the one that you are selling, and thus, you are able to provide a more complete solutions to your customers without the needs to develop all by yourself.

10. Lack of Vision - By having a clear goal and vision for your business, it will help you to focus on establishing business strategy and development to log term success. Write down your vision, analyze and revise it if needed to keep you moving closer to your future plan for your every step. It will also help to propel you in a correct path, approach each steps systematically and you will have a better chance to achieve the goal.

The success of any business relies not only on good planning, market research, business management, marketing and relationship with your partner and customers, but also on the focus and vision that will lead your business further and a continual grow and success.
About the Author
Dave Origano is proud to be one of the Fabulous Five-Watch over his should as he and four colleagues build a million dollar business from scratch in three short months - MrOrigano.com
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