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Reasons Why Businesses Fail and How To Avoid Them

As a new business owner, what are the traps to avoid from the start? And what can you do to stay in business? By understanding the following pitfalls you can hopefully avoid them and keep your business running smoothly for far longer than 5 years. Let’s dive in

1. Insufficient funds due to weak forecasting

Poor financial forecasting is the main reason why businesses fail. It is relatively easy to plan fixed costs such as rent, monthly subscriptions, utilities, etc. Business owners should expand this out in detail when writing their initial business plan. However, it can be more challenging to forecast revenue generated from sales. Many new business owners are overoptimistic in their planning and vision. This results in an inability to pay off initial investment. As a result, the business fails. Similarly, companies may launch their product or services at a cheap price to be competitive. While it can work in the short-term, it’s not a sustainable business model. Once you start with a low price, it’s difficult to increase. Goals should be ambitious, but attainable. And the budget should reflect accordingly.



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