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The Main Reasons Why Small Businesses Fail

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Small Businesses

Unfortunately, as many as eight out of ten small businesses that set up in the UK fail within the first year and a half (eighteen months). There are a number of reasons why this is the case and some of these will be discussed below in more detail.

A lack of cash

In the world of business, it is said that cash is king and there is a good reason for that. For instance, without cash small businesses are unable to pay your bills – whether that be suppliers, energy providers etc. To learn more about how much energy do small businesses use and the cost of this, follow the link. So if all of a business’ money is tied up in stock or in invoices that have not yet been paid, they can quickly find themselves in trouble.

In order to prevent this from happening, small businesses can devise some sort of strategy that makes it easy for them to get paid on time no matter who it is they work with. In addition to this, they need to remember not to extend themselves beyond their liquid cash limits. 

Poor management

The leadership of a small business starts right at the very top, yet many owners are unable to let go over the smaller parts of the day to day running of it. A leader who is more focused on cleaning the office fridge or reordering ink for the printer than on the direction the business is going in is not a leader.

This is why it is important that small businesses build up a strong team around them who can have tasks delegated to them. Doing this frees up the time of the leader so that they are able to focus on bigger picture stuff that is really going to enable a small business to grow into a bigger one. 

A reliance of a couple of big customers

All too often small businesses rest on their laurels after landing one or two significantly large accounts or customers. A lot of the time this is because they do not believe that they possess the capacity for more customers, particularly those that are smaller. It may also be because they stop marketing once they are happy with the customers that they have. However, a lot of small businesses fail to consider what they would do should these significant customers go away.

It is important that small businesses always continue to market themselves in order to attempt to cultivate a wide and diverse customer base so that in the event of a large account leaving, they are not left high and dry with nowhere to turn.

No defined plan Every business, regardless of its size needs a plan for what it hopes to achieve and how these goals will be reached over the next twelve months. This information needs to be clearly communicated on paper so that all workers are able to read and understand what the business is doing.

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