Lessons to learn from business failure
No one sets out to fail, but the reality is a number of small businesses will.
However, failure can be a great teacher. The trick is to first identify the lessons failure offers and then learn from them. Doing so is a sure-fire way to ensure your business survives and thrives.
Here are five of the most common reasons why businesses fail and the lessons we can learn from them:
Failure to manage effectively
Mismanagement is cited as one of the most common reasons small businesses fail. Sometimes it stems from the transition from dream to business. Small business owners often start with a dream. That dream becomes a passion and passion becomes business. Where things fall over is when passion comes first and business comes second.
Small business owners are also guilty of trying to do it all. Sales, marketing, accounting, customer service, recruitment, administration, cleaning - the list goes on and if one person is doing it all then something usually has to give.
Lessons learned: 1) Accept that you can't do everything and know when to ask for help. 2) Focus on what's important to the success of your business. Understand that if your passion becomes your business, you'll need to reprioritise - business comes first.
Failure to plan
If you are just starting out, you may spend some time in the red before you actually start making money. Prepare for this by having enough cash reserves or at least a plan to access more money should you need to. In small business, there is a constant two-way tug for cash between suppliers and buyers, so you'll need to keep on top of your finances.
Lesson learned: Be realistic about your financial position, keep a close eye on cash flow, have sufficient working capital and come down strong on late payments.
Failure to connect
If people don't want the product or service you are providing, you are effectively irrelevant. Start with the customer - you need to understand them; know what they want, how they want it what it's worth to them. To do that, you need to listen.
Lesson learned: Engage in a two-way dialogue with your customers, not a monologue.
Failure to communicate
Once you've connected with your customers, you need to communicate. There's no point designing, manufacturing and putting to market the perfect product to meet your customers' needs if they don't know about it. There are so many ways to communication today - there's traditional advertising like TV, print and radio, as well as social media, networking events and brand champions - all inexpensive yet effective ways of reaching your audience.
Lesson learned: Learn the language of your customer - that is, don't speak French to a Russian. Be clear, be concise and be compelling.
Failure to adapt
Doing what you have always done is sure to set you on the path to failure. To stay ahead of the game, you need to anticipate and react to competition, technology, consumer behaviour and other changes in the marketplace. A good leader will always challenge the status quo and look for better, faster ways of doing things. New technology, new ideas, new competition, new innovations - these are the drivers of change and the right change can propel your business to great success.
Lesson learned: Keep your eyes wide and your ears open. Anticipate changes in the marketplace and react. Never stay still.
For more resources, tips to help you build your business, see our how to grow your business resources.
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