Mistakes To Avoid When Running A Business

According to statistics from the U.S. Bureau of Labor Statistics, only a handful of new businesses survive long-term. More specifically, in the first year of operation, about 22% of startups fail. Less than 50% of businesses make it to 5 years of operations, and only about 33% of businesses surpass the 10-year mark. There are many reasons why businesses fail, but here are the most common mistakes to avoid when running a business so that your business can survive for as long as possible.

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Insufficient Cash Flow

Cash flow is essentially the amount of cash you have available to pay whatever financial obligations your business incurs. Cash flow and profits are not the same. Even if your business is highly profitable, your business can still have problems surviving if there is insufficient cash flow within your business. For example, a problem with cash flow arises when there is pending payment from a product or service that your business had provided that has yet to be received, but you have other bills which need to be paid that you are unable to pay for unless the payment comes in.

Insufficient cash flow is a common problem many businesses that fail face. If you are a business owner with cash flow problems, you may wish to consider a working capital loan to tide you over the period.

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Lack of Market Demand

One big mistake is for owners to build their businesses on the assumption that there will be market demand for their product or service. Another probable reason could be that there is a lack of understanding and communication to the market about how the service or product offered can help to improve the lives of users, resulting in the lack of demand. Either way, it is critical and essential for businesses to engage in proper market research and understanding of their audience for businesses to offer something that the market needs or wants.

Problems in Your Team

Problems will arise when there are internal issues in the team. When you do not have the right team, productivity will be negatively affected. And when unhappiness within the company arises, your team could make statements or behave in a way that misrepresents your brand, ultimately leading to reputation damage of the brand.

Lack of Differentiation

Competition is natural in every market. However, when a business fails to position itself strategically, and does not differentiate itself well enough from the rest of the competitors in the market, this will result in a dwindling demand of the product or service offered by the business. This ultimately affects the business and results in business failure from the lack of demand.

Expenditure Exceeds Profit

Running out of money is a practical problem faced by businesses. This is different from cash flow problems. Running out of money basically means that the accounts payable exceeds the accounts receivables. In layman terms, it is when a business spends more than they are earning, thus leading to failure of the business. In order to avoid this, proper financial planning of the business must be done beforehand.

Running a business is complicated and requires consideration in many aspects. If you are a business owner and you find yourself tied up in financial issues like insufficient cash flow, you may contact us for a consultation today.