A basic rule for fighting failure is to find people who have failed, and ask them why they failed. A start-up business in general, and a business startup in particular, must update, and quickly learn the lessons of failure, not repeat the mistakes that they have learned.
People who run businesses should consider this as one thing in their management work. Five common causes of business failure, which small and medium-sized business entrepreneurs need to know are:
Firstly, producing products and providing services to the market is what the market needs, not what we have. On the other hand, our products and services must be competitive, such as cheap prices, good quality, effective and dedicated warranty. Note that competition is not determined by you, but by the market. New businesses, always aiming for high competitiveness of their products, to gain market share, but because they are too high and do not have enough long-term resources, they are forced to leave the game soon.
Second, start-ups will focus on customers who bring a lot of income, have large deals, but forget that we are a new business, as a small business, we need to using short-term goals/investment as stepping-stones towards achieving your long-term goals/investment. When customers are big, have high requirements in buying and selling, or don't choose us, as partners anymore, the financial hole, to cover the regular expenses is a burden, threatening the existence of the business.
Third, businesses with thin capital often seek credit loans. These businesses, initially feel secure when getting credit, because they are small and thin capital enterprises. However, in order to get a loan from a bank, businesses have to mortgage their assets, be it their own house, the house of their parents or from their relatives to guarantee with their property. Most businesses will see a profit, but twenty-four months later, even though they are profitable, there is no cash to cover the principal, interest expenses, and gradually have a feeling of shortfall first, shortfall later in expenses. The answer is the profit generated by the business, not enough debt and capital from borrowing. Enterprises that own assets, mortgage the bank, in their cost of capital costs a part of the cost is depreciation, to cover the principal debt, and interest payable or payable on other amounts, in business operations. You can study this through two business financial evaluation index, EBIT, and EBITDA.
Fourth, start-ups often have the mentality of underestimating initial business losses, and even planning losses in two or three years of starting a business. By the time you get to the second, third year and you realize the losses will continue, it's too late. The reason for this is that everything on the market today changes very quickly, from consumer psychology to science and technology. A safety plan for business, small and medium or micro, recommended short term forecast, only 06 to 12 months only.
Fifth, in business there is always risk. A start-up business usually has little experience in forecasting risks, because it has not been experienced in this situation. Therefore, it is necessary to learn to make provisions for business risks, when making adequate risk provisions, businesses will not overspend. On the contrary, when business risks occur, businesses easily overcome difficulties.
