Last Updated on March 25, 2023 by hassan abbas
We all face the fear of failure during our professional life. Getting started as an entrepreneur is always a risk. You sometimes have to undergo serious failure and challenges to succeed. If you plan to start your own business or business, you will need to focus on sustaining it over the years to be successful. But do you know why SMEs are going bankrupt these days? Here we explain the main reasons for this situation so that you can avoid being the next person to be affected.
5 Reasons Young Businesses Fail
When talking about small and medium-sized businesses, it’s common to think of quick success, just because they’re small businesses. However, the reality is that there are many factors that can cause them to fail. Here we tell you why SMEs really fail and what the main reasons are:
An idea not connected to a need
You may think you have found the idea of the century, but is there a market for this product or service? It is essential to ensure that it meets an existing need. Don’t be one of those entrepreneurs who are so passionate about their product that they forget to test it.
Once the need has been confirmed, and the clientele has been identified, take an interest in the competition. If it is strong, make sure you have the means to differentiate yourself. Does the competition seem nonexistent? Be careful; this is not necessarily a good sign, and there may need more customers.
Lack of a solid business plan
A business plan is a tool that will bring together the company’s entire strategy. It is used to define the project, identify the people involved and frame the stages of development.
It is a valuable roadmap for oneself as an entrepreneur and for all the actors who will gravitate around the project: employees, banks, suppliers, and service providers…
The business plan is the foundation of your project; its solidity is an essential condition for success. It includes economic and financial components that will help you with your investment decisions, ensure your profitability and anticipate the expansion of your business. Be careful to follow a flexible plan: a regular update will allow you to remain flexible and adapt to development phases and hazards.
The lack of skills
Some entrepreneurs think they can be successful because they know their product and industry inside out. A former catering employee who creates his catering business certainly has all the cards in hand to offer a quality service, but is he able to develop his business?
Becoming an entrepreneur means putting on several costumes: salesman, accountant, sometimes manager… It’s hard to feel comfortable in each of them, yet it’s essential! To fill its gaps, two solutions: outsource specific tasks or train to develop your skills.
Poor financial management
Fundraising is ideal for making the initial investments necessary to launch the project. Your arguments and a solid business plan will allow you to convince investors, including in the context of a crowdfunding campaign. But successful fundraising is not a guarantee of success! On the contrary, many entrepreneurs take advantage of this capital inflow to engage in rapid development (investment, hiring, etc.), weakening the company.
Controlling and planning your medium and long-term cash flows will allow you to meet and honor your commitments (reimbursement of bank loan, payment of suppliers, etc.)
Keep an eye on your sources of financing, the evolution of your costs, and your pricing to maintain your financial balance.
A flawed marketing plan
Does your target client know your products? Defining a multi-channel marketing strategy will allow you to reach the right people at the right time and thus increase your sales. Marketing is not a detail of the company’s development strategy: skipping or spending time on redundant tasks (creating business cards when your audience is mainly online, for example) can be fatal for the company.
The internet is everything these days, if you don’t adapt to this reality, you can end up hurting your SME. The integration of new technologies and digital tools will be a plus that will facilitate the purchasing process of your customers and help you penetrate the market in which you operate. A website and presence on social networks are essential in most sectors today. By sharing engaging content, you will manage to create a brand image, reach new customers and retain your base. SEO Sydney will help you reach your potential clients and increase your sale through the best digital marketing services.
Now that you know better why SMEs are going bankrupt these days, you have a better view of the aspects to take into account to avoid having a bad time in running your business.