Why Most Small Businesses Fail The First Five Years?

Introduction.

It takes a great deal of hard work to set up and run a successful small business. You will not only need to sell your product or service, but also manage the administrative aspects of the business

This factsheet looks at some of the common factors that could cause your business to fail and provides some suggestions on how these factors could be addressed.

Lack of skills and qualifications

Anyone planning to start a new business will benefit from training in general business and enterprise skills, but many business owners ignore training because they cannot spare the time or the money.  In some sectors or professions, you must have formal qualifications or certification in order to operate, but often the business owner and staff are not required to undergo any specific training or have any qualifications.

This does not mean that training should be overlooked. Factors that can cause your business to fail include:

• Not having the right skills, qualifications or experience to run a business.

• Not going on any training courses to help you understand marketing, finance, recruitment, etc.

• Getting out of your depth and not learning any new business skills.

Little or no market research

Many business owners make the mistake of making or selling a product or service for which there is little or no demand. You will not have all the information you need about potential demand for your product or service if you don't do sufficient market research before you start your business. Failure to undertake sufficient, detailed market research can result in poor sales and can cause your business to fail.

No clear marketing plan or strategy

New businesses frequently fail due to the lack of a clear marketing plan or strategy, especially if insufficient customers are aware of, or prepared to buy, the product or service on offer.               

  All businesses need sufficient customers and sales to enable them to cover their costs and make a profit, but customers won't come to you unless they know about you, your product or service and what benefits it will give them.

Insufficient finance and cash flow

Too many businesses fail due to lack of start up and working capital, or because of cash flow problems that emerge a few months into trading.

Your business will fail if:

• You don't have enough cash or other working capital at the start up phase.

• You don't understand basic finance principles such as breakeven, profit and loss, and cash flow.

• You keep losing invoices, sales receipts, purchase orders, etc.

• You don't chase late-paying customers fast enough.

Poor planning

Whether you are a new or established business, you should have a constantly evolving business plan to help you define your current objectives and your strategies for achieving them.                                   If you do not stay focused on the objectives in your plan, you will quickly find that you are starting to lose control of your business.

Common mistakes include:

• Not preparing a business plan.

• Spending too long preparing your business plan.

That`s Some of Important aspects That Can Cause Business Failure.
There Also Many Other Reasons But Those Are The Most Important Ones.

By: Nasrudiin Hikam Abdirahman.
Student of Economics and Management Science @Daha_International_University.
And Business Activist.
Contacts:
Email: haabare2030@gmail.com
Mobile: +252618919977.