Why Companies Fail—and How Their Founders Can Bounce Back

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Setting up a business is a risky proposition. After all there were 406,000 new businesses started in 2017 but the SBA estimates just 30% of businesses fail in the first two years. That actually means you have a good chance of success; providing you discover why companies fail and how to bounce back.

Business Entity

The first thing to realize is that there is a big difference between a company and a sole trader. There is a good reason why the US is a great place to start a business. Put simply if you are a company then your liability is limited; ensuring your home and persona assets are protected and you have the resources to try again.

Getting the right company set-up is critical to your ability to bounce back.

Learning

The other element that ensures a founder can bounce back is to learn from the mistakes they’ve made first, second or even third time round. Every failure is simply a stepping stone to future success; all you have to do is learn from the mistakes and try again.

This is what many great entrepreneurs have done.

Finance Issues

Any business will fail if they run out of money. The secret is to hold on to your money for as long as possible. If you’ve ever dealt with large corporations you’ll know they can take months to pay. Take a leaf out of their book and find a balance between keeping your suppliers happy and taking as long as possible to pay them.

It will help your cash flow which is essential to your business.

Wrong Product

It doesn’t matter if you have a unique product if no one is interested in having it. Companies can fail simply because they haven’t checked there is a demand for their product / service.

Attracting Customers

Marketing costs money but you need to attract customers. This means there must be a balance between how much you spend on marketing in relation to the profit it will bring you.

Many businesses spend too much on marketing and destroy their profit margins; effectively sinking the business.

Business Skills

There are very few people who naturally have all the skills necessary to run a business. You need to be prepared to learn and rely on others with expertise. If you can’t do this your business is likely to fail.

Put simply, focus on your strengths and allow others to do the same.

You may not be able to afford a team when you first start up but building a good team round you is essential to ensuring the long term success of a business.

Business Systems

A viable business has set systems and procedures; this means that the product can be produced without the business owner having to be involved in the process.

If you are unable to separate yourself from these systems then you will never be able to focus on the direction the business is going in and managing the overall strategy. A business which doesn’t do this is highly likely to fail as they will always be reacting to issues rather than be prepared for them.