With business demography statistics indicating that a staggering 50% of small businesses fold within five years and 70% don’t last a decade in business, the champagne could be short lived if business owners don’t go into the process ready to learn.
It’s impossible to know it all, especially as a first time business owner. That said, by factoring in some of the most common reasons why businesses fail, this can help reduce the chances of the same fate applying to any startup within the current climate.
Unexpected Disasters
No business owner thinks a customer will ever have an accident on their premises, an employee will sue them for damages or even that a freak weather event will cause thousands of pounds worth of damage to stock and equipment. The trouble is, even with the most attentive attitude towards how the business operates, there is no way of eliminating all eventualities.
Therefore, business insurance is absolutely essential. Some forms of insurance are a legal requirement, but business owners should look to ensure they are fully covered for the many different types of disaster that could threaten the business’s ability to trade.
For any business owner heading to NimbleFins to compare public liability insurance, the good news is that the average cost of this insurance type is just £120 a year for a small business in exchange for millions of pounds worth of cover.
Without insurance, businesses are vulnerable to financial ruin which could arise from any number of circumstances. Insurance will not only pay out any insurance claims but will cover the associated legal fees too, giving peace of mind as well as excellent value for money.
Misjudging The Market
Getting into the minds of consumers is never easy, but without a clear understanding of what customers want and even who their customers are, a business has little chance of appealing to the masses. In addition, customer appetites may also change over time, which is why businesses must keep their fingers on the pulse.
Market research is therefore something that needs to take place before starting a business and routinely once the business is live. Otherwise, both the product offerings and marketing efforts are likely to miss the mark. The questions that need to be asked are not only who will be buying the product or service but why, especially over any competitors.
Ultimately, all businesses need a clear idea of their target demographic, ensuring all business and marketing decisions factor this blueprint in. Taking the cosmetics industry as an example, which is worth £27 billion in the UK alone. Going back a decade, product hauls and general excess was seen as the trend. In today’s market, consumers are opting for more sustainable options made by diversity friendly companies. The customer priorities have totally shifted in a very short time and companies must stay on their game – the same is true for any business, regardless of the industry it operates within.
A Lack Of Revenue
One of the fundamental principles of business is that it is there to generate revenue. However, with so many overheads to juggle, let alone a competitive market it’s not always easy to stay profitable.
That’s why it’s essential to stay on the ball where the finances of the business are concerned. Similar to market research, the work has to start before the business has even launched, with aspects such as financial forecasting, budgeting and working out how the business will be financed in the first place to be reviewed.
From there, the services of a bookkeeper and an accountant can help to navigate any bumps in the road, as well as spotting opportunities for profit or investment. In addition, tax planning should never be overlooked so that HMRC remains on side.
Business owners should continue to look for opportunities for growth within the company, whether this involves introducing new product lines, add-ons to existing services or price rises in line with inflation to name just a few examples.
Clueless Marketing Strategy
Marketing is how businesses get the word out about the products and services that it offers. It’s also a discipline that involves far more than posting on social media or even handing out a few flyers. Instead, marketing requires both a knowledgeable and dedicated effort to reach the right people with the right messaging.
From misjudged social media posts causing offence online to bland email marketing campaigns – there are endless ways in which marketing can either create negative attention for a business or fail to attract attention altogether. Either scenario is a huge risk for businesses.
In any case, having an external marketing agency that can offer a fresh take on how best to market the business is often a winning strategy. The key is to offer both consistency and quality, remembering that although marketing is about the business, the messaging should solely have the customers in mind.
To Sum Up
The main risks for a new business can best be summed up by not having a clear strategy in terms of target marketing and profit generation.
Failing to take care of insurance can also trip business owners up since any number of events could threaten the trading ability of the company. So in essence, now is the time to review all of the possible issues both in terms of a practical sense as well as the business offering as a whole.