Chronicles of a Failed Business (Why Businesses Fail In the First 5 Years)

in Project HOPElast year

There are a lot of statistics about new business failure, a few say 95% of all startup businesses fail within 5 years another says about 65% fails within 5 years. Either 95% or 65%, the figures are real high for business failures and finding a way out of it is a good way to keep businesses flourishing but do this startup entrepreneurs know why they fail?

Failing in business can vary from one entrepreneur to another and even after reading a thousand books many still fail because business is practical, you are to sail your ship to harbor without wrecking the ship and without sinking.

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Why do Businesses fail?

Paper Failure

You may ask what paper failure means but statistics show it that 75% of most businesses fail from their planning stage, meaning the business already failed before it began. Before starting a business, it is important to run a proper market survey about the product you are bringing to the market, checking and doing proper research on competitors and making sure the business has competitive advantage, proper business model and having adequate financial calculation, but not doing the proper research and having the right digits about the business means the business already failed before it began. Also a lot of entrepreneur do not know what it takes to do a quality research, business plans could take up to 6 months to complete in some cases and up to 2 years to have a solid customer base. In most cases of failed businesses, the entrepreneur wants to get everything as fast as possible.

Cash flow Problem

Cash flow is one major reason a lot of businesses fail. Do not get me wrong, I did not say profit flow because not all businesses make profit in the first five years of operation. When there is no money available to keep the business going until it starts making good profit then the business fails. A lot of startup business owners are in a hurry to improve certain things in their business, they want to spend money to renovate and do a lot of things or even live flamboyant in the first five years of business which often is wrong. No matter how successful your business appears in the first 5years, never go on a spending spree. The first five years of a business is to collect money from customers and be able to operate sufficiently.

Poor Management

Inability to delegate, inflexibility, micro-managing the work of others, or abdicating important work responsibilities are the major managerial problems in a business. This is why a lot of businesses die due to poor management. Being a good manager doesn’t require a degree at Harvard, It just requires having a good attitude, being flexible to ideas and good organizational skills are required to keep a company going.

Bad Customer Relation

When a customer sends a mail to a company several times and gets no response, the customer starts to lose interest in the company. When a happy customer comes into an organization, says hi to the receptionist with a smile and the receptionist replies shabbily and without humor, the customer starts to withdraw. Little things that happen to customers in a business can either chase them or make them stay. If I go to a store and I get a bad reception, it will be the last of me in the building. Keeping customers is keeping the business.

Bad Staffs/ Staffing Problem

Never employ a family/friend in a startup because the will feel too comfortable. Staffing problem is a major issue in startups and this problems varies from dishonest staffs, to employing bossy staffs who instead of counterbalancing the entrepreneur weaknesses, they act as bosses. One major reason why entrepreneurs employ bad staffs is lack of proper background checking and the hurry to employ the first person that comes in.

Poor Marketing

A quality product and or services will not sell itself to customers, it requires selling ability by the seller. So, the success of a company is dependent on the ability to sell their products and services. Selling a product to a customer involves understanding human psychology, marketing and promotion. Be able to sell your product and your business will thrive.

Other reasons are not limited to lack of competitive advantage, Bad pricing and Shortage of capital. Knowing everything about business is not necessary to start one, but it is necessary to start learning business tactics.

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A lot of factors could make a business fail. I'd like to just add an extra reason for business failure.

Lack of commitment and dedication to the business: There's no way your business would grow if you don't stay committed to it. There are no two ways about it. Lack of commitment would make you not notice areas that are failing and slowly it eats up the system and finally crashes the business. Learn to devote time for your business.

Thanks for the contribution @tomlee, without dedication and commitment in a business, there is definitely no way for growth.

The truth is not every entrepreneur understands the basics of being an entrepreneur. The attitude of spending money to do unnecessary things like renovation in the first 5 years of a business isn't a good one at all. A business should only start spending money to renovate and expand after the business has broken even.

The response to this is in my conclusion; Knowing everything about business is not necessary to start one, but it is necessary to start learning business tactics. The earlier entrepreneurs start to learn business practices the better the businesses grow.

Thanks for spending reasonable time on my post.

The road that leads to a successful business is not a smooth one, but with sacrifice, it is definite that we will get an headway.

Diversion of attention from the major goal of a business is failing in business, the tips you shared are great and worthy of basic attention.

Definitely, a business that lacks this five tips is definitely doomed to fail.

These tips you have shared are absolutely the major reason behind failure in business, that is one reason why it id essential for entrepreneurs to look out for these factors before taking decision in their entrepreneurial journey.

Yes they are, thanks for the contribution.

Hi @ajewa

There Are Several Factors That Cause A Business Failure

  • There is no planning
    Don't underestimate a plan. Whatever is achieved, let alone built, it requires a plan. It's okay for you to have a passionate after participating in training or business seminars and business from one successful entrepreneur.

  • Marketing is weak
    At the beginning of the business, indeed we still have enough capital. Producing goods that will be sold as much as possible is sometimes fun because it hopes that there will be many benefits that can be achieved. However, neglect of marketing will actually make your goods dust not sell.

  • Bad management
    Apart from plans and marketing, never forget about management. Management of a business does not require you to have a background in management, accounting, business and so on. No, what you need is to record in detail at each stage of your business.

  • Uncontrolled employees
    It's nice to be a boss who has a lot of employees. But, being the boss is not your goal when you plan to build a business. Therefore, run your own business first or if it is not possible by yourself, recruit one or two employees first. Remember, recruit employees according to their duties and the number of jobs available.

  • Pulling money too fast
    Getting a lot of profit from your business is certainly very pleasant. You might always want to check balances in an account. What is in the minds of novice entrepreneurs usually want to have fun because they think they already have it all. However, this is the factor that causes your business to collapse. Not only because of the feeling of being quickly satisfied but mixing business money with personal money, using business money for personal needs too early is not the right decision. You can take advantage first but only as much as you need and make sure your business will not limp after the money is used.


Some of the factors I mentioned above often occur in the business world, and there are still many other reasons.


I like the fact that you have added these tips to further explain what i have written,especially the last part of mixing business money with personal money, that one factor has the capacity to ruin a business completely.

Seriously amazing comment buddy.

I am just getting to know about this community but what i am seeing here is true communication. New Businesses fail a lot because the business owners want to relax and start spending money somewhere else. A lot of businesses have failed in a very short time because of the lavish spending attitude of the business owners

You are welcome to the community @ireti, it is a great place to be.

Failure begins in business the moment you forget what your reason for starting the business is.

Hi @ajewa

an interesting and brilliant publication.

It is important to know that the basis of all good business is planning, and you mention important points, such as the treatment of the public, well-prepared employees and cash flow. Each scenario and each entrepreneur is different, but the important thing is to have information as valuable as the one you are sharing. Thank you very much for making such interesting and educational publications 👍

I really appreciate your amazing contribution @reinaldoverdu.

Hi @ajewa

Another good post, thanks upvoted. I find that I have lots of ideas (good I hope) and a strong vision. When I bring staff into executing against it, I often feel that it become lost or diluted. I suppose on your points above, I need to pay attention to the plan and the staff. However, my point is we need to not lose sight of the vision and why we are doing it as the staff will concentrate on what we are doing not why we are doing it.

Yes, a friend once told me that staff usually come to work for the money and not for the growth or success of the business, but with proper training and making them realize what the business stands for, we might get an headway.

Hi @ajewa

You are absolutely right there are many factors that determine the failure of a company within the first 5 years or simply before its birth.

The environment of the company of how it will be and what it will be created for, which will be its objectives. planning is a very important part I can say that the most important a well-planned company has a good future.
My name is very much the notion of not employing relatives, I think that is a good point, is that family and friends believe with the right that they cannot be called to attention for doing something wrong.

Delegating functions is also very important. The owner of the company cannot be in everything.

Thanks for this good reading.

@lanzjoseg thanks for your contribution, a friend of mine started a small salon and decided to employ families into the business, the family members mismanaged the business and when he tried to say something, he was seen as a cruel person for a simple mistake done by his relatives.

Anybody going into building a business should have these tips at their fingertips. You have really done an amazing job to explain why many business do not make it through the 5-year period.
Thanks for sharing

Thank you so much for your time and i am happy you were gained something from reading my post

Very trur @samminator. Right at their fingertips :)

ps.
Are you using steemauto.com? We've launched "Project HOPE" curation trail lately and I figured that perhaps you would like to join and support our efforts with 30-50% voting power

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How does it sound?
Cheers, Piotr

Yeah buddy, I'm already following Ph-fund on steemauto. It's an honour

Love to hear that :)

@tipu curate

Upvoted 👌 (Mana: 15/20 - need recharge?)

Resteemed and upvoted already :)

Absolutely worth reading @ajewa

Based on my knowledge, over 90% of start-ups fail within less than 2 years. So those businesses who can reach 5 year lifespan are already ... well, doing better than most :)

You're right, that either it's 95%, 65% / 5 years or 2 years - that's still a huge problem.

My personal impression is that most new businesses fail because those who are behind them have very little idea about budgeting and planning expenses. That soon ends up with their businesses struggling with lack of liquidity and money flow being disturbed.

Definetly doing research is also a must. Generally speaking - solid read.

Cheers
Piotr