What causes businesses to go bust?
Businesses run into problems for all sorts of reason but most of them are avoidable. Here are some of the most common problems we come across.
Failure to understand your market and customers
Think about who your customers are and consider the best ways to reach your target audience. Research into your customer’s other suppliers may help you identify gaps in what they are receiving – gaps that you and your business could fill. What makes you different? What can you offer that others can’t?
Choosing a product or service that isn’t very profitable or doesn’t have a wide market
You may gain a lot of interest and activity when starting out, but if the profits aren’t enough to sustain your business needs, then a re-evaluation may be in order. As a company, if you are targeting a very niche market and a narrow audience you need to stand out from your competitors to ensure high sales numbers.
Unable to react to trends and competition
If competitors are up and coming and are following the current market trends, it can be easy for your business to be pushed aside if you aren’t doing the same. Think about what your competition is doing differently, as what may have worked in the past may not work in the future. So be willing to change and adapt to new ideas and technology to maintain your business.
Failing to offer a reasonable price for your product/services
When it comes to pricing, again competitive awareness is key – you want to be viewed as good value for money when your customers review their options, while also ensuring your business remains profitable. Promotional offers for new customers or running deals for a limited period of time can help to grab attention initially but remember longer term to sell your company or products benefits.
Cash flow problems
Cash reserves are vital when starting a new business. Enough cash to keep you afloat for at least the first sixth months and managing how much cash you are receiving and paying out is essential. You may have a slow start but if this is still happening after the first year, is it time to look at budget cuts and possibly a different financial angle? Should you take more upfront payments? When should credit be given or not given to customers?
Management and delegation
You can’t do it alone, and being unable to manage your business efficiently is never good, so although you may see your company as your ‘baby’ employing someone with the necessary skills to help means there is more stability and a better action plan for your business. Try not to do everything yourself or your product or service level may slip putting your whole business in danger.
Not asking for help!
Asking for help in the early stages can really help when dealing with all manner of business concerns. For example, here at Abacus we know from experience that speaking to your financial advisor or accountant early on means you can have ongoing support, and if there are tough times ahead, they may be able to help you identify issues and get your business back on track before it’s too late.
Having a good adviser is crucial to getting ahead in business. If you would like some free impartial advice then please feel free to contact one of our friendly team on 01376 343535 or email us at info@abacus-accountancy.com