How to prevent business failure

According to a number of studies carried out on new businesses, one out of three new small businesses fail after the first two years, and about 65 percent of new businesses don’t make it to the ten-year mark.

Business owners can prevent themselves being part of the 65 percent of businesses that fail by taking certain precautions right from the outset and save themselves from the loss of all their time, money and effort which they would have invested in the business venture.
You need good leadership skills to steer your business through the turbulent first years of operation.

As a leader you need to define your destination and direction of your company and have a picture of how your business should look like and how it will be operating when you get there.

You need to have a vision of what you want to achieve and have it written. Share your vision with your team. They need to understand and own the vision if they have to run with it together with you.
To move your business into the future you also need to continuously develop and improve on a certain set of skills.

You need to have good decision-making skills, interpersonal skills, communication skills and general management skills.
Your business can fail if you exhibit poor management skills, which can be evident in the way you make management decisions, or how you supervise your staff or communicate your vision.

In some cases you fail to display leadership or guidance when problems requiring strong leadership occur.
You may be reluctant to take charge and resolve the issues immediately and in the meantime your business continues to slip toward the abyss.
The survival of your business is dependent on the decisions you make today that will have an impact on your tomorrow.

Be very careful of the decisions you make. You might not have all the answers to the problems that you need to decide.
You therefore need to consult your accountant, your lawyer or mentor. Any advice you can get from these people can prevent business failure.

Every business decision that you make has an impact on the bottom line-on your profit. So make sure you know the impact of your decisions on the profit.
Discuss with your team. Look at every aspect of the decision. Do the necessary analysis. Donald Trump, the American President elect said, “I have made tough decisions, always with an eye on the bottom line.”

Never be pushed into making hasty decisions unless you know its impact on your profits.
However do not prevaricate making decisions either because that will also spell doom for the business. Procrastination is dangerous.

The failure of the leader to exhibit his leadership skills can affect the whole organisation as the failure trickles down the organisation and permeates every aspect of your business eventually affecting the morale of your employees and impacting negatively on their productivity.
Leadership inadequacies can be addressed through a number of initiatives.
You need to be open to learning. Enrol in some leadership courses that will expose you to the critical skills.

Find a mentor who can teach you from what he has gained through the years. Conduct personal research about leadership, about your industry and explore the other business best practices and see which ones you can apply in your business.
These moves will catapult you from the 65 percent doomed businesses to the surviving ones.
Armed with the vision of your business venture you should now come up with a detailed plan of how you will operate the business.

There is a famous saying that says, “If you fail to plan, you plan to fail.” A good, strong business plan is a must, it is vital for business success.
The business plan should articulate your vision and why the business exists, that is, what is its mission. It should clearly show what the business model is — how the business intends to earn its revenues: what are its revenue streams.

The process of drawing up the business plan itself will open you up to explore many things you might not have thought of when you came up with the business idea.
In the process of preparing your business plan you will have to assess your strengths, your weaknesses and the opportunities and threats the business is exposed to.
A knowledge of these factors will awaken you to issues that you will need to address before and when you are running your business.
You cannot predict the future but at least you can determine what your future should look like by planning ahead.
By scanning your environment you can identify certain trends that can impact on business adversely or those that you ride on and avoid extinction.
This is all achieved through proper planning. You don’t operate through luck in business. You need proper, good planning.

Stewart Jakarasi is a business & financial strategist and a lecturer in business strategy and performance management. He provides advisory and guidance on leadership, strategy and execution, preparation of business plans and on how to build and sustain high-performing organisations.

l For assistance in implementing some of the concepts discussed in these articles please contact him on the following contacts: sjakarasi@gmail.com or +266 58881062 or on WhatsApp +266 62110062