By Yinka Kolawole

It is the dream of every entrepreneur to build a successful business. But studies have shown that 99 percent of all new business ventures fail within the first ten years. The question is why do small businesses fail? And what can you do to avoid failing in business? According to Boune T. Pickens. Jr., “There are no disasters in business that you can’t avoid if you see them coming and make the adjustments.” The following highlights major reasons why small businesses fail and addressing them appropriately can serve as shield against business failure.

Lack of managerial skill

Building a business without the necessary managerial skill in place is a futile adventure. An entrepreneur that wants to succeed must be able to effectively handle the employees, cash flow, production line and so on; or better still; the business owner must be able to hire a good manager to run the business.

Wrong decisions

“Before making an important decision, get as much as you can of the best information available and review it carefully, analyze it and draw up worst case scenarios. Add up the plus or minus factors, discuss it with your team and do what your guts tell you to do.” – The Mafia Manager.

Whenever you have decided on an action to be implemented on your business, consider asking friends, business partners and professionals for advice. It is going to save you the stress of cleaning up the mess resulting from wrong business decision taken.

Harsh fiscal, economic and monetary policy

As an entrepreneur, you must be on guard to shield your business against the ever changing government fiscal and monetary policies. Since you cannot influence or alter government’s decisions, you must be ever prepared to swiftly adjust your business to prevent it from being hit by the adverse effect of unfavorable government policies.

“How fast a company can respond in an emergency is a measure of its corporate reflexes” – Bill Gates

Inability to move with trend and changing technology

Change is constant, so it is either you align your business with the trend and ride to the top or you remain stagnant and eventually fold up. You also need to constantly upgrade your technological strengths as swiftly as possible. As an entrepreneur, you must be on your toes sniffing the air for available trends and new technologies you can take advantage of. Remember, trend is your friend, not your enemy.

“Your greatest and most powerful business survival strategy is going to be the speed at which you handle the speed of change. That speed of change is trend” – Ajaero Tony Martins

Weak management

This is the fundamental reason why small businesses fail to survive. A standing rule in the business world is this: “The success or failure rate of any business is directly proportional to the strength and level of professionalism of the management.”

From the first day of business, a very strong management is needed to ensure the survival of the business. You might say employing professionals such as attorneys and accountant is very expensive but they will do your business good in the long run.

Better still, you can consider bringing in these professionals as partners. By applying this method, you will not pay them salaries while employing their services but they will share in the profit of the business. It is a win-win situation. No matter what tactic you wish to apply, ensure you have a strong management strategy.

Fierce competition

Most small business owners are afraid of competition because many profitable ventures have been forced to shut down due to fierce competition. Even if you are the inventor of an idea, that will not stop competitors from coming in. Keep an eye on your competitors, utilize every available innovative idea and make your customers happy. You can also implement some of the best protective firewalls to keep your competitors at bay. These are: Trademarks, Patents and Copyrights.

“In business, the competition will bite you if you keep running. If you stand still, they will swallow you” – Victor Kiam

Wrong location

The location of a business is such an important factor that can never be over emphasized. If your business is located in an interior area than your competitor’s, you are bound to fail. Factors to consider when choosing a business location are road network, nearness to high traffic zone, accessibility and patronage level of customers, population, demographics and so on. Imagine a business that sells motivational books located in brothel. You can expect nothing but outright failure.

Bad debt

When a business is owed much as a result of free credit line to customers, it is bound to fail. One key role of an entrepreneur is to keep an eagle eye on the cash flow. Since a business must never be short of cash and customers too must be kept loyal, the business owner must establish a certain credit limit and a fixed time from date of purchase to pay up.

Insufficient capital

Raising capital is the primary duty of an entrepreneur because cash flow is the life blood of business. Insufficient capital can kill even the most profitable business. In a case where there is insufficient capital and the business is finding it difficult to access funds from bank and investors; the entrepreneur must resolve to bootstrap financing, which is working with the limited cash, eliminating unnecessary expenses, establishing a credit line from suppliers and producing only on demand to avoid tying up resources.