by Rakesh Malhotra
It is rather easy to set up a small business due to the availability of unlimited opportunities to suit every kind of expertise, skill, and budget. However, a great deal of effort is required to run a small business successfully. It has been observed that most entrepreneurs fail to manage their companies within the first few years of operation. They may have exceptional dreams, strategies, and plans, but still fail for various reasons. In order to become a successful entrepreneur, one should be able to recognize his/her mistakes and learn to avoid them.
Reasons of Business Failure
When an entrepreneur steps into the industry and starts a new business, failure is the last thing that he/she wishes to think about. However, if one is able to realize common reasons of failure in advance, he/she can efficiently tackle them.
1. Inappropriate Motives: If an entrepreneur starts a business on the wrong grounds, he/she is most expected to face failure. Before setting up a business, you should inquire yourself if you just want to make money. In such a scenario, you are likely to focus on short-term benefits rather than maintaining long-term relationships with your clientele.
2. Insufficient Business Planning: Lack of effective strategies is another important reason why small businesses fail.A careful and methodical business plan is mandatory to execute any kind of business activity and own a profitable business. If you fail to devise a proper business plan, you may miss many milestones of success.
3. Premature Expansion: A great majority of small businesses fail because their owners believe that their success depends on expansion. If a business opts for an untimely expansion, it is less likely to maintain its growth, production requirements, and customer satisfaction.
4. Poor Management:Managing authorities have a strong influence on performance of any business project. New entrepreneurs often lack applicable management skills and expertise in different areas including production, finance, selling, procuring, and employee supervision.
Be a Prosperous Entrepreneur
Successful entrepreneurs are people who have immense belief in their abilities and are determined to make their dreams come true. They are the individuals who are prepared to accept risks and embrace every opportunity to live according to their own terms.
1. Setting Priorities: A collection of skills that plays a decisive role for any small business is that of setting, organizing, and executing priorities. Successful entrepreneurs set up goals as means to identify priorities. A lot of entrepreneurs do not understand the difference between urgent and important, which often leads to business failure. Urgent tasks are those that have to be immediately executed but do not necessarily have a considerable impact on your success. However, tasks that have a significant impact on your life fall in the category of important ones.
When entrepreneurs set priorities for their business, they do not merely focus on the most immediate tasks. Instead, they also consider essential projects as well as identify when an important job transforms into urgent.
2. Stay Focused on Goals: A successful and profitable business is one whose owner can speculate future conditions. He/she should be able to recognize factors that can play an important role in raising capital. When prosperous entrepreneurs set goals for their business, they usually create written testimonials of expected future conditions and also figure out how their organization intends to achieve each stated goal. This procedure may also require actions by specific departments or individuals involved in the business project.
3. Build an Inspired Team: Formation of an inspired and hardworking team requires consistent efforts. As a motivated leader, you should be able to make work a source of sustenance for your employees. Motivation and encouragement help to formulate a culture that fosters confidence and creates an atmosphere for cooperation and support. A working team that incorporates creative, imaginative, and flexible individuals is not only strategy driven, but also finds better solutions.
4. Emphasize Execution: A great majority of small businesses fail because their managers are not able to put their strategies into action. While methodical business planning is important, execution is able to take your business to the next level of success. It actually serves as a link between your organization’s plans and outcomes. Your business venture may suffer through failed plans and poor results only because you lack in execution.
Successful entrepreneurs have the following attributes that enable them to execute their strategies.
- They prioritize their goals.
- They encourage people for their abilities.
- They know themselves, their business, and the working team.
- They fully utilize their resources.
5. Profit and Cash Flow: In any business project, it is vital to recognize the margin between income and expenses. Cash flow defines money that flows in and out of a business from different operations and activities. For successful entrepreneurs, determining cash flow is more important than generating profit because it can eventually make them unable to pay their bills.
Contributed by Rakesh Malhotra, Founder of Five Global Values (www.fiveglobalvalues.com) and Author of “Adventures of Tornado Kid, Whirling Back Home towards Timeless Values”. Passionately determined to uncover the mystery of human behavior, his fascination with the influence of core values on human behavior stems from a career which has seen rise from an entry-level sales job to that of a seasoned CEO. Having worked, lived, or traveled to more than 40 countries, he has been able to study performance and human behavior across all cultures.
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