Does Your Strategy Suck? Get this Free Guide to Find Out.

 I always say running business is controlled chaos. With this information as a backdrop, I’ve put together a list of 10 common reasons businesses close their doors:

We often ask our clients, “Where will you play and how will you win?”. In short, it’s vital to understand your competitive market space and your customers’ buying habits. Answering questions about who your customers are and how much they’re willing to spend is a huge step in putting your best foot forward.

2. Opening a business in an industry that isn’t profitable.

Sometimes, even the best ideas can’t be turned into a high-profit business. It’s important to choose an industry where you can achieve sustained growth. We all learned the dot-com lesson – to survive, you must have positive cash flow. It takes more than a good idea and passion to stay in business.

3. Failure to understand and communicate what you are selling. 

You must clearly define your value proposition. What is the value I am providing to my customer? Once you understand it, ask yourself if you are communicating it effectively. Does your market connect with what you are saying? 

4. Inadequate financing.  

Businesses need cash flow to float them through the sales cycles and the natural ebb and flow of business. Running the bank accounts dry is responsible for a good portion of business failure. Cash is king, and many quickly find that borrowing money from lenders can be difficult.

5.  Reactive attitudes.

Failure to anticipate or react to competition, technology, or marketplace changes can lead a business into the danger zone. Staying innovative and aware will keep your business competitive.

6. Overdependence on a single customer.

 If your biggest customer walked out the door and never returned, would your organization be ok? If that answer is no, you might consider diversifying your customer base a strategic objective in your strategic plan.

7. No customer strategy.

Be aware of how customers influence your business. Are you in touch with them? Do you know what they like or dislike about you? Understanding your customer forwards and backwards can play a big role in the development of your strategy.

8. Not knowing when to say “No.”

To serve your customers well, you have to focus on quality, delivery, follow-through, and follow-up. Going after all the business you can get drains your cash and actually reduces overall profitability.

Sometimes it’s okay to say no to projects or business so you can focus on quality, not quantity.

9. Poor management.

 Management of a business encompasses a number of activities: planning, organizing, controlling, directing and communicating. The cardinal rule of small business management is to know exactly where you stand at all times. A common problem faced by successful companies is growing beyond management resources or skills.

10. No planning.

As the saying goes, failing to plan is planning to fail. If you don’t know where you are going, you will never get there. Having a comprehensive and actionable strategy allows you to create engagement, alignment, and ownership within your organization. It’s a clear roadmap that shows where you’ve been, where you are, and where you’re going next.

Running an organization is no easy task. Being aware of common downfalls in business can help you proactively avoid them. It’s a constant challenge. We know, but it’s also a continuous opportunity to avoid becoming one of the statistics.

 Five common causes of business failure

Failure won’t be at the front of many business owners’ minds when they launch a company. However, with four in ten UK businesses struggling to make it past five years, it’s always worth keeping an eye on the warning signs. In this article, management accountant Kirsty Fitzgerald outlines the five bad practices to avoid if you wish to give your business a fighting chance of success.

Poor cash flow management

You may be sick of being told “cash is king”, but it doesn’t change the fact that poor cash flow management can lead to the demise of any business. Indeed, even a profitable business can fall victim to a crippling cash flow crisis, which is often caused by the ineffective management of debtors, high stock levels, bad debt and late invoicing. Inadequate financing – or selecting the wrong type of funding for your business – can also put it on the path to failure. Without access to sufficient growth capital, whether in the form of personal savings, private equity or debt finance, your business may not have the “fuel” it needs to grow.

Losing control of the finances

Any business owner needs to be aware of their financials and cash position at any given time. The accurate forecasting of income and costs may lead to a few surprises, but it will ultimately help support your cash flow. Business owners should also understand and control their costs – acknowledging risks and opportunities – which should help minimise any nasty surprises. Employing an experienced accountant, or investing in a good cloud-based accounting solution, can help ease the burden of financial management, allowing you to focus on day-to-day business operations.

Bad planning and a lack of strategy

“Failing to plan is planning to fail” – cheesy but true. Quite simply, long-term planning is key to the success of any business. When mapping out the growth of their business, a business owner needs to conduct market research to establish who their customers are and what they need. They also need to recognise their competitors and be proactive regarding trends, to avoid getting left behind. Just look at the numerous bricks-andmortar retailers that didn’t adapt quickly enough to changing customer shopping habits and are now struggling or have gone under as a result.

Weak leadership

A good leader recognizes the skills they lack or the jobs they do not have time for and either employs, outsources or seeks professional advice to fill those gaps. They will also communicate, direct, reward and offer the opportunity for personal growth to their employees, creating a happy, effective and loyal team. Poor leadership, on the other hand, leads to demotivated and ineffective teams, which can easily cripple a business.

Overdependence on a few big customers

An overdependence on a few big customers could easily lead to business failure if one of them suddenly pulls out – both cash flow and profit will ultimately be hit. The temptation could then be to offer discounts to that customer; however, this will only lead to poor margins over the longer term. Minimise your risk by increasing your customer base, diversifying your product portfolio and encouraging your customers to sign contracts with a reasonable notice period.

Here at London & Zurich, we work closely with business of all sizes, assisting them with everything from cash flow management to payment processing. For more information on our Direct Debit and card payment solutions, don’t hesitate to get in touch today ‘

 10 Effective Ways to Overcome Business Failure

 Andrew Moran Business and Finance Expert

 Business is a tough racket. When you succeed, you feel like you are on top of the world. When you fail, it feels like you’ve hit rock bottom. It is estimated that about one-fifth of small businesses shut down in their first year (PDF), and nearly half of smaller enterprises crumble in their fifth year. These numbers do vary worldwide, but one thing is for sure: running a company is not for the faint of heart.

For a lot of entrepreneurs – neophytes and mavens – understanding how to overcome corporate failure in a rational manner is one of the hardest lessons to learn. No entrepreneur sets out to invest in a startup, only to see it shut its doors within a year. But it does not need to be a glass-half-empty scenario. In fact, it can be the opposite by knowing that success can be attained through failure.

We have compiled a list of ways that you can conquer business failure and turn the experience as a stepping-stone towards something greater.

1.  Establish a contingency plan

A business contingency plan is a necessary component for every entity’s strategy planning because it prepares us for the worst-case scenario. It is comparable to a rainy-day savings account: Sure, you do not want to prepare for a sickness or a job loss, but life happens, and it is better to be ready than blindsided.

 This is how contingency planning works; your organisation has a detailed course of action to implement, should an unforeseen circumstance or unexpected situation unfold before your very eyes. You’re proactive.

Here are some tips when putting together a contingency plan: Perform tests to determine if your plan works.

• Refine your contingencies as time progresses to ensure you adapt to changing conditions.

• Partner with a dependable IT firm that can ensure your data is safe and retrievable.

• Implement checks and balances to identify weaknesses.

• Designate someone in your firm to devise a contingency plan – if you have a large business.

• List your credit options, like a business loan, as a just-in-case survival element.

 2. Conduct a SWOT Analysis

Every organisation – large and small – should conduct a SWOT analysis. The primary objective of this age-old technique is to understand the ins and outs of your enterprise and what factors are taken into account before action is taken.

 Wait a minute. What does SWOT analysis stand for?

• Strengths: Positive internal attributes, physical assets and competitive advantage over rivals.

• Weaknesses: Negative internal factors, such as gaps in your staff or processes that need to be improved.

• Opportunities: External elements that might contribute to your corporate success.

• Threats: Outside forces that you do not have control over, like a global pandemic that shuts down entire economies.

Since you are attempting to overcome business failure, it is imperative to concentrate on the weaknesses and opportunities aspects of your SWOT analysis. These two considerations may likely have been the cause of your entrepreneurial demise. 

3.  Focus on Your Customers

Without an injection of customers, it will be hard to maintain operations. If you are unable to build leads, accumulate prospects and gain new clients, then it is imperative to concentrate on the customers you do have. It is comparable to an inspirational movie, Jerry Maguire: a sports agent loses all his clients, except one football player, and the agent needs to apply all his resources and energy to this particular athlete.

When you can’t capture a new revenue stream, you must harness the power of your current patrons. Whether this is attempting to expand upon their business with discounts and new products or leveraging their patronage for email marketing tactical purposes, focusing on your most loyal and frequent clients can be one of the smartest business tricks you can utilise.

4.  Be SMART

Just how SMART is your company? This analysis can quickly revive your operations by quantifying the aims of your firm, enabling your organisation to possess an articulated objective with all parties. You may be wondering by now what SMART is:

• Specific: Your goal is quite elementary, my dear Watson. It is simple, precise and unambiguous for all stakeholders.

• Measurable: Your objective is easy to measure and assess your progress, allowing you to determine if you are on the right track.

• Attainable: Your aim is realistic and achievable. If it is a pie-in-the-sky dream, you set yourself up for failure.

• Relevant: Your target matters and relates to the entire firm, not just a select few (or none at all).

• Time-bound: When do you wish to achieve your goal? The answer to that question can matter significantly because the timeline can affect your solutions and options. Six weeks or six months – your practices can vary by the calendar.

 Do you feel SMART enough yet?

5. Manage Cash Flow During Downturn

During any hiccup, you must count your pennies. Without consistent cash flow, your firm could succumb to the basic laws of finance. If you don’t have money coming in, it will be hard to keep your doors open. Until that dire day, there are several ways to attain a regular injection of cash:

•   Send out invoices on time to ensure you are promptly paid.

• Contact clients that are in arrears and that have been bucking you for weeks.

• Accept deposit payments in advance.

• If applicable, use an accounts receivable financing service to add the balance of money to your coffers.

• Refrain from falling behind on your own bills to avoid additional expenses. Even if some of the invoices seem inconsequential, there is an old saying that says follow the pennies and the dollars will follow!

6. Invest in Social Media

Marketing professionals often say that if you aren’t on social media, then you aren’t trying. It has become a cliché, but it still rings true for many businesses that think social networking is overcrowded and that it is a waste of time and resources. This is a mistaken belief because the better viewpoint is that there are millions of potential customers at your fingertips.

Social media platforms such as Twitter, Facebook, Pinterest and Instagram are all valuable tools that can be utilised when you want to generate new leads, advance your brand strategy and amplify your digital operations. If most consumers are in a certain place, why would you avoid travelling to that destination?

 7. Hire a Business Advisor

One of the causes of a failing business is that too many owners are stubborn and refuse to adapt or even take responsibility. We get it. You have put your blood, sweat and tears into your company, and you don’t want to be told that a lot of what you did was wrong.  

Whether you are just starting out or you have been an entrepreneur for a few years, hiring a business advisor can be one of the best investment decisions you will ever make. Since a business advisor is a successful entrepreneur with a knack for the corporate world and the marketplace, you can pick their brain about what went wrong, what you can do to move forward and how you can achieve success.

8.  Avoid Emotional Decision-Making

Making decisions based on emotions is one of the reasons behind a business failure. It may be easier said than done, especially when you are in a moment of rage or sadness. That said, taking a few moments to collect yourself and become rational again is paramount to ensure you overcome the hurdles and barriers. Go for a walk, grab a coffee or just take a deep breath – this is the entrepreneurial mindset you need to maintain during the bear and bull markets of your business cycle.

9.  Surround Yourself with the Right People

It is said that you are the company you keep, suggesting that if you surround yourself with the wrong type of people – morose, procrastinators, ignorant or lazy – then you will adopt their characteristics. There is some truth to that, particularly when you are running a company. Imagine having someone in your office who shrugs about everything and says no to everyone. This toxic behavior can significantly affect your business’s performance.   

Instead, you want to have top talent on your team, and you want your immediate circle to be encouraging, upbeat and equally invested in your company.  Experiment Outside Your Comfort Zone  

Entrepreneurship is about taking risks. If you are uncomfortable with uncertainty, then you should work for somebody else instead of being self-employed. However, if you can take a sensible business risk by weighing your options, stimulating your little grey cells and testing them out, then why not? Risk is manageable when you are not doing it based on emotion.  

Ultimately, to run a successful company, you need to step outside your comfort zone on occasion. In the years to come, you will have accrued a reservoir of experience, knowledge and wisdom that can be tapped into when you need them.  

Elijah John