It is always very disheartening when you go through your financials and discover that money is not flowing into your business like it used to. Many a times, it gets really difficult to pinpoint the problem, talk more of trying to mitigate it. You have to get to the river before you cross it. What this article is going to do, is serve as a map to the river, so that you can cross it. I am going to give 6 reasons why your business might be failing. The first reason are the obvious factors that are even ”visible to the blind, and audible to the deaf”. I will first state these under the umbrella of “Obvious reasons” then talk about the remaining 9 there after.
The most difficult problems to solve are the easiest to spot. When a problem is hard to find, the moment you find it, your solution is already at hand. This saying holds true – ‘When you discover your problem, it is already half solved’.
The obvious problems in business usually are:
a) Finance: In this article, I am discussing on why businesses start failing. So it means that the business must have been going well in the past. Therefore, initial capital is not a problem here. Initial capital is a start-up problem. Here, the finance I am referring to is capital and finance to continue the business. But how does a business that was doing well, somehow develop a finance problem? The reasons could be:
– Expansion: when an expansion project is carried out, and the business expands beyond what the present capital and finance can carry, then a finance problem kicks in.
– Loss of A source of finance:
When a source of finance is lost, and the business was dependent on it to a large extent, it shows immediately. For example, a major customer who pays before his goods are even produced. You practically use his money to produce his goods and sell to him at a profit. If you lose such customers, your business is bound to get affected.
– Your business gets involved in a case that cost so much money. It could be a tax issue or a legal matter, where your company was sued.
– A huge investment did not bring expected result.
b) Government Policies:
Some new government policies may lead to a drop in your business. For example, when the importation of a major raw material is banned or a very high tax is placed on your product and other policies that disfavour you.
c) Companies with More Money Have Overtaken the Market:
Yes. This happens alot, and it really is beyond your control, unless you can get extra sources of fund to expand to their level.
d) Circumstances beyond your power:
This could be climatic conditions that render your product useless for that period, or where you are forced to relocate because of some reasons, or your product is declared poisonous or dangerous to long term health. Just imagine the plight of poultry farmers during the period of bird flu. Bird flu wasn’t even in Lagos, and people had stopped eating chicken and eggs in Lagos state.
NOW WE MOVE TO THE STRATEGIC, INNATE DYNAMIC REASONS WHY YOUR BUSINESS MIGHT BE DECLINING.
1. Poor Customer Relationship and Service!
Hey! Your customers are human beings. You don’t expect them to be treated poorly and think they’ll still continue patronizing you. Sometimes, these customers do not have any choice because your probably are the only one doing that business in your area. However, the moment other businesses begin to spring up, trust me, your customers will start declining, along with your sales. Employ people that are polite, or that can at least act politely. Never let your employees be the reason why you lose your customers. You could create a direct link for communication between you and your customers, so that if an employee misbehaves, you can be told, or if your customers are not comfortable somethings, they can explain the situation to you. This helps a lot. A suggestion box, a direct call number, etc. can go a long way.
2) Your Quality Dropped
Just because people have started patronizing you so much does not mean that you should start producing sub standard products. They started buying from you in the first place for some reasons, which could have included your quality. Dropping your quality later on could have bad consequences on your business. As long as there are other businesses around, doing the same thing, your customers might leave you. If your cost has gone up, then instead of dropping quality, probably you should discuss with your customers and up your price a bit. Never mess with the quality.
3) Inexplicable High Price
When your price is higher than other prices in the industry for no justifiable reason, then you are on the ”run down road”. Some products are usually expensive more than others because of their brand name, quality, etc. These are justifiable. But the moment your customers discover that your price is higher than others, for no good reason, then they might leave you… and you can’t blame them. Having a higher price just because you were the first to start business in the area, is not justifiable. Having a higher price just because you spend more on advertising is not justifiable. Note that your customers did not ask you to advertise. You did it for your own benefit, so you can’t expect them to pay for it.
4) Poor Employee Management
A wise manager always makes his employees feel as comfortable as possible so that they can deliver at their best. Pay them consumerate wages and salaries. Pay them on time. Provide facilities that would make their job easier and more convenient. Be nice to them. Allow them go for one or two days off if they are not feeling well. Don’t be overly mean. Make your employees a part of the team. Make them a part of the business. Implore them to do their jobs like it is their own business. Remember, the work of your employees translates into the finished product that you sell. The better you treat your employees, the better your product.
5. Failure to Move with The Trend
So many businesses decline and fail becuase they are living in 2001, in a 2016 world. Things change everyday, and new processes are discovered. The internet wasn’t like this 15 years ago. Trends come and go, and people change. Some managers experience the fear of change. But if every other person is changing and nothing bad has happened to them, why cant you change? I am not saying you should change your philosophy, but your methods and processes need to be updated for people to be interested in using your product. For example, if you are a maker of bags, and you notice that almost everyone now owns a laptop, it will be wise to make bags that have special places for places for laptops and laptop chargers.
6. Lack of Innovation:
Innovation simply means doing something in a new way. It is different from invention. Invention involves designing something new, while innovation simply means doing something that is already existing in a new way. Take a look at phone companies. Observe the competition between and among them. Apple, Samsung, LG, Nokia, HTC, Infinix, Tecno, etc. These companies keep the competition hot with inventions. A simple invention and they are ready to release a new phone model. Any company that fails to be innovative might get buried in the sands of time. Employ innovative thinkers… creative thinkers.. people that think outside the box… people that question everything. This is the reason why most recruitment companies now include IQ tests as part of their questions.
7. Less Commitment to Your Business Because it Has ‘Stood’!
You’ve pushed and pushed, and now your business is established. It is doing very well. But is this enough reason for you to sit back and do nothing? Your commitment might have been what got you this far. Even if you are going to turn down the heat a bit, don’t allow the room get cold.
8. People Stealing From You
You should be vigilant and very observant to ensure that people are not exploiting some loop holes in the business to steal from you. Your employees must have who they report to. The person in charge of funds must not be the same person doing the accounts. The person auditing should be different. Sometimes, businesses decline and fail after some greedy employees have eaten so much into the business without the knowledge of the owners. Maybe sometimes you should employ the services of an external auditor to help you check your internal control systems. Although it is not his job to do this, but he just might help you detect fraud, or at least prevent it.
9. Poor Financial Management!
Save the best for the last? Well, maybe. So many people do not know how to properly manage their finances. They just believe ”It’s my money. I have a right to use it like I want”. Your business should be separate from you. Business money is not your money. You should have an amount that you pay yourself from your business, if it is not a standard company yet. Don’t buy unnecessary business cars or buses. Spend wisely and always project future financial business needs.