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4 Reasons why SME's are failing

Why Small and Medium Sized Businesses are Failing, Yours Included!

01 November 2015, 20:20

A lot of small and medium-sized businesses continue to fail year after year. The sad thing is it is not because of bad luck or something that is beyond the control of their owners. Most owners don’t know the basics of business that include management structures, cash flow understanding, and reporting, just to name a few.

When running a business, one must be a master of the business basics and Time Management. It is important to know the skills that you have or do not have and delegate to others, the tasks that waste your time. If you know you have a weakness in an area then you need to either work on it or hire someone who has strength in that field. Even if the owners know the business basics, their businesses fail in the first three to five years because the owners failed to realise how to apply them to practical use. Below are some of the reasons why small and medium-sized businesses are failing.

Inadequate Planning

One of the reasons why small and medium sized businesses fail is that owners fail to plan and innovate. Before the official start of the business, there must be a period of pre-planning. While this is a tedious process, there are no shortcuts around it. A good owner must have a must have a systematic approach to make sure that the goals are achieved and they have an idea where they are heading. Most small and medium-sized businesses tend to start on the right foot, but they lack a future plan, which is why they fail even before reaching their short term goals. They also seldom review their goals to see what has and has not been achieved. Most people only set their goals for the year on the 1st of January and most only review their progress with those goals on the 31st of December. It is much the same with business owners.

Fail to Incorporate Technology

Businesses today are lucky to have access to technology that can enhance their operations in so many ways. The best thing about Technology is that small and medium sized businesses can afford to use these modern tools, which include automated accounting, e-purchasing, and online catalogues, websites and social media marketing. When a business doesn’t see the importance of technology to their operations, they will not be able to keep up with the demands and fail in reaching their business goals. The biggest problem businesses face is finding the right people to put this technology in place for us and at the right price. Many of you will try the cheapest option first only to land up with something that does not deliver results. DON’T! As the adage goes, you pay for what you get. That being said I do not recommend spending a fortune either. Like all things in business it is often worth calculating the ROI (Return on investment) of such things before spending the money. If you do not know who to ask, get a consultant in to check it.

Insufficient Cash Flow

Most small and medium-sized businesses fail to recognise the amount of money they need to survive. They often have unrealistic expectations about their sales and incomes that can lead to their downfall. It is important that owners have an idea of how much capital they need to start up a company and stay in business for a long period of time. Business owners should have enough capital to keep the company afloat before it can make good profits. The same goes for expansion plans.

Another aspect to this is the need to understand your current cash position at all times. In order to do this one needs to carefully track and monitor you sales, expenses etc. This needs to be done on a daily, weekly and monthly basis! Waiting for the accountant to tell you that you are broke is never an option. If you know your cash position you can make quick changes to your business’s structure to avoid landing up in sticky situations.

Too Greedy, Too Prideful and Too much Ego!

A lot of small and medium-sized businesses fizzle out within their first couple of years because they are too greedy. They try to charge too much in order to get a good return on investment in a short period of time or they stop networking with other businesses fearing those businesses may steal their clients.

Businesses often fail because of their owners have too much Pride. They never have a candid talk with their family, business partners or friends about the state of their business. When you find yourself in a situation that you do not have the skills to deal with, get help! There are many great consultants and businesses coaches out there that can help you out. All you have to do is swallow your Pride and ask… After all, I can guarantee that every single one of those consultants and coaches has been in the exact place you are.

Lastly, and this is the real killer, there is Ego. I cannot tell you how many times I have watched businesses fail because of the owners ego. They believe they know better than everyone else and try to do everything themselves. They stop delegating and become mistrustful of their staff and business partners. They breed a culture of superiority and fear in their business. Often these owners will snap at their staff over minor issues and outright ignore bigger issues while claiming that it’s not an issue and telling everyone they can handle it any time they choose.

These last three points are a major problem in any business and almost certainly spell the end for any business. You can have the best technology, the best systems, the best cash flow and the best planning... but I guarantee if you allow your mind-set as a leader, CEO or business owner to be ruled by Greed, Pride or Ego, your business will fail! If you are making any of these mistakes, get help to fix it, get a business consultant or get a business coach. Remember no successful person ever did it all on their own.

“No more romanticizing about how cool it is to be an entrepreneur. It’s a struggle to save your company’s life – and your own skin – every day of the week.” —Spencer Fry, CarbonMade co-founder


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