A notorious statistic is the rate of business failure within the first few years of operation. How do business owners make sure that their business thrives and grows? My Business discusses some of the ways for businesses to avoid business failure.
Starting a business involves a lot of time, money and effort and failing—or even going bankrupt—is the last thing that any business owner would want to happen to their business.
Consider the following points when it comes to preventing business failure:
- Supervise cash flow
- Avoid going into debt
- Create a solid business plan
- Maintain good customer service
- Learn from business competitors
Supervise cash flow
One of the most primary issues that business owners face when it comes to managing their business is the supervision of the business’ cash flow. If left unsupervised, expenses might shoot up and profits might lessen thus increasing the possibility for the business to go bankrupt.
In order to mitigate business failure, business owners should strike a balance between shelling out cash for the business expenses and gaining business profit via sales. Business owners should also take time to focus on tasks such as accounting and bookkeeping to make sure that finances are in order, which is especially crucial for fledgling companies.
Avoid going into debt
Probably the easiest way for business owners to prevent their business from failing, it is understandable—especially for startup businesses—to go into some form of loan. Debt is a way for business owners to augment their funds and support business expenses, either in the form of credit cards or business loans.
While this is a good way for business owners to secure expenses, they should also be careful. When it comes to debt repayment, the business might be spending all its revenue on repaying debts and loans instead of spending on the needs of the business.
Instead of spending on income-generating efforts, such as expansion or adding more staff, if debt repayment is left unchecked for long periods of time it could cause bankruptcy.
If business owners can do away with their business without going into debt, it makes it easier for start-up businesses. It might be hard to start with only a meagre amount of capital, but keep in mind that this is way better than having to put up with debt repayments in the future, especially if the business does not grow as initially planned.
Create a solid business plan
Planning ahead and covering all possible bases is one surefire way of making sure that a business avoids total business failure. Failing to create a business plan is a mistake that a lot of business owners commit.
An ideal business plan, aside from containing sales and marketing strategies, should also have contingency plans that can be utilised in case of an emergency. The business plan should also contain a clear strategy on how the business will be able to bring in profit while still having enough funds for the business expenses. Business plans should also be sustainable.
Maintain good customer service
Another way for business owners to prevent their business from going bankrupt is to make sure that revenue keeps coming in by maintaining good customer service—thereby assuring that customers will continue patronising their business. This can be done by maintaining a personal relationship with customers, listening to and addressing their concerns immediately and tailoring the business in such a way that addresses customers’ needs.
If a business already has a dedicated customer base, it is best to nurture this particular customer base and make sure that they remain loyal to the business. This is a cheaper option as compared to constantly looking for means to acquire new customers while disregarding an already loyal audience.
Learn from competitors
Competition is always tough in any kind of business industry. Business owners should take healthy competition as an opportunity to learn and possibly replicate measures to mitigate business failure.
There is a reason why these businesses succeed in their fields: business owners can be sure that their competitor’s methods are tried and tested and could have a higher chance of succeeding if applied to their business.
Business failure is the one thing that a lot of business try to avoid, but prevention and mitigation is easy if business owners have the foresight to prepare and develop a good strategy before setting up their business.