According to research by the Small Business Administration, only half of the new businesses have survived during the first five years and only a third of new businesses can survive for 10 years.

On the contrary, it is reassuring, as we can conclude that if only 50 per cent of new businesses are left during the first five years, the other 50 per cent will fail in the first five years. We can also conclude that about 65 per cent of new companies do not reach the ten-year mark.

Forbes reports a single Blecker statistic based on Bloomberg‘s research, which shows that eight out of every 10 businesses fail within the first 18 months.

What are the reasons that companies do not prosper, they are given 50/50 chance of survival and given any product or service for which there is demand? Let us analyse six reasons why companies fail and some ways in which business failure can be avoided.

Six reasons why companies fail:

Leadership failure

If your management demonstrates poor management skills, your business may fail, which may be evident in many ways. You will fight as a leader if you do not have enough experience to make administrative decisions, staff supervision or lead your organisation.

Your leadership team may not agree on how the business should be managed. You and your leaders can discuss each other publicly or refute each other’s instructions. When there are problems that require strong leadership, you may be reluctant to take over and when your business is constantly moving towards failure.

  • How to avoid leadership failure: Useless leadership in your business will filter and affect all aspects of your operations, from financial management to employee morale, and once productivity is interrupted. Learn the horizon, study, find a mentor, enrol in training, do so personally.
  • Research: what you can do to improve your leadership skills and industry knowledge. Test other best business practices and see which ones you can apply to your business.

Lack of exclusivity and value

You may have an excellent product or service for which there is a strong demand, but your business is still failing. It may have a mediocre outlook or lacks a strong value proposition. If there is a strong demand, it probably has many competitors and does not stand out from the crowd.

How to avoid the failure of a value proposition: What distinguishes your company from competitors? How to do business in a completely unique way? What are your competitors doing better than you? Develop a personalised approach or package of services that no one else in your industry is using, so you can present it as a solid value proposition that attracts attention and interest.

This is how a brand is built. Your brand is the image that your customers recognise and associate with your business. Your value proposition should support your brand identity, including your logo, motto, colours, and all the aesthetics and visible business philosophies that represent your company.

You have to separate it from the package and present your personal perspective to your customers. Do your best to present that unique value proposition to your market so that you can capture a market share and start building your conversion rates.

To advertise your brand and differentiate yourself, you will need to speed up your marketing plan and use more and more places to present your brand to the public. You can be a lot better than your rivals, but it doesn’t matter if your prospects don’t even know you’re in the game.

Use social networks, word of mouth, cold call, direct mail and other tried and true marketing techniques. Make sure you have a well-optimised online presence, develop lead generation technology and capture contact information, such as high-quality content on your site, a newsletter and gift of information for customers.

It is out of touch with customer needs

If you don’t keep in touch with your customers and they understand what they need and the comments they give, your business will fail. Your customers may like your product or service, but they may like it if they change this function or modify that process.

What are they telling you? Are you listening Or is there a market decline? Are you still selling what you are selling? These are all important questions to ask and answer.

Unprofitable business model

Similar to leadership failure is to build a business on a model that is not solid, works without a business plan and seeks a business for which there is no proven revenue stream. The idea of the business may be good, but if there are no established strategic guidelines, the implementation of the idea may fail.

Develop a complete business plan that includes financial forecasts based on projected revenue, strategic marketing, and challenge management solutions to overcome potential obstacles and competitive activities.

Create a milestone chart with specific tasks and objectives specified over time so that you can measure success, solve problems as they occur, and stay on track. A solid business model that incorporates best practices can help your company avoid failure.

Poor financial management

You should know, until the last penny, where does the money in your business come from and where is it going to make your business successful. Your business may also fail if it lacks a contingency financing plan, a store of money that you can turn into in the event of a financial crisis.

Sometimes, people start businesses with dreams of making money but do not have the ability or interest to manage cash flow, taxes, expenses, and other financial problems. Bad accounting practice puts a business on a direct path to failure.

If 50 per cent of new businesses fail, 50 per cent of new companies can succeed. Starting a business is an exciting endeavor that requires a clearly defined product or service and strong market demand.

Whether you want to start a new business or are already doing it, you should understand that success depends on careful strategic planning and sound fiscal management that starts before it starts and continues throughout the life of the business is.