Businesses fail for a variety of reasons, but there is a common, basic group of missteps that ultimately result in most business’ demise. Learning about and then taking steps to protect yourself from such mistakes could be the key to your business’ survival.
After years of surveying the marketplace, consultants and other business experts have created lists of the most common reasons that businesses fail. Although these lists can differ, experts agree that the following five reasons are common to most business failures:
1. Making decisions based on insufficient management information – Without the proper resources to make well-informed decisions, your business strategy is akin to finding your way in the dark — you may know where you want to go, but you cannot see the path. You need timely and relevant data to guide your business decisions.
2. Neglecting to plan for disasters – About half of all businesses experiencing a disaster with no effective plans for recovery fail within the following year. Make sure your business is prepared well before a disaster hits.
3. Failing to secure long-term financial support – Any strategic moves must be financially realistic. No matter how smart the strategy may be, a business will fail if it cannot execute its plan due to insufficient financial support.
4. Investing your resources in only one place or plan – Failing to diversify your business’ resources makes it vulnerable to swift change and prevents it from being able to take advantage of new opportunities.
5. Losing sight of your business’ core values – Forgetting or neglecting why you got into business in the first place can be fatal—remember what pushes you and your business toward success to help you keep moving forward.