Business management principles adduce reasons why a business fails. However, there are other less obvious but equally potent reasons why a Small Business may fail.
Profit is a measure of business success. There are known considerations and principles for business start-up success. These include business plan, choice of location, capital, customer service, book keeping, staffing, publicity, etc.
However, many start-ups overlook these basic business principles thinking they do not apply to them; and this may lead to business failure.
Below are the less obvious reasons why a one-man Business fails.
- Your Profit Calculation is Wrong
If the calculated difference between your selling price and your cost-of-production is wrong, your business may crash sooner than later. Selling Price minus Production Cost must be positive for your business to survive and make profit. Be sure to factor in all costs into the calculation!
- You are in the Wrong Business
Is your business right for you? Are you excited about it? Do you have the drive? Are you a round peg in a round hole? Not being in the right business could lead to failure.
- You're in Business for the Wrong Reasons
Starting a business just because you want to answer "Boss"; or because you want to escape from the 9-5 workday routine, is a wrong move. Being in business for the wrong reasons can cause failure.
A successful business is highly rewarding. But it requires great personal sacrifice and long hours of work; and you must be ready to work even harder. Start a business only if you have a strong Drive, Desire, Purpose, Vision and Mission.
- You Plunder the Business
Disloyal and poorly motivated employees can plunder the business by wasting time, low output, or even stealing raw materials and finished products. This can run a business down.
Business owners also plunder the business by taking money from the business for non-business purposes; by using business funds to cater for social, family and personal expense; by taking money from the cashier and not accounting for it - because you are the "boss"!
You must separate your personal expense from your business expense. Place yourself on a salary and live within it.
- Where is the Money?
Poor credit management can lead to business failure. When your operating capital is tied down in debt, and out of reach of the business, then there is danger of bankruptcy. Selling on credit, having many debtors and a poor or no repayment plan, can cripple any business.
Remember, no business fails overnight. There usually are noticeable tell-tale signs before a business crash. If you are mindful and alert, you can take action to prevent a business collapse before it ever happens.
Stay Smart, Wealthy and Wise!
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