There are numerous reasons why your business may declare bankruptcy. It could be due to either external or internal factors. External factors are those over which you have little to no control. An example is the COVID-19 pandemic, which has adversely affected many businesses in South Africa since 2020. Internal factors could include poor marketing, weak leadership and management, or lack of a business plan. However, these are issues that you can avoid if you have the correct guidance and knowledge. Learn more about the main causes of business failure and how it can be avoided.
Poor marketing
Too many businesses dive into new markets or introduce new product lines without carrying out the necessary market research first. The failure to conduct proper market analysis is a common mistake that leaves you unprepared to deal with new and existing challenges. When mapping out the growth of your business, you need to conduct market research first to establish who your customers are and what they need. You also need to recognise your competitors and be proactive regarding trends, to avoid getting left behind.
A lack of budgetary planning, not setting up proper accounting procedures or forecasting accurate income and costs can lead to the downfall and bankruptcy of your business. Hiring a reliable accounting team if you do not have sufficient knowledge regarding finances can be useful. They will be able to provide you with guidance and help you manage your business’ finance. They can also provide you with advice to cover your business legally so that you do not get caught up in any legal battles later on.
Weak leadership and management
Weak leadership and management of a company leads to demotivated employees. As a result, employee performance will deteriorate, which can cripple a company. Good leadership will cause your employees to work together more efficiently which will allow your business to reach its full potential. A good leader has great communication skills, and would always offer his employees opportunities for growth. This creates an effective and happy team which, in turn, leads to a successful business.
Lack of a business plan
If you do not have a plan or direction for your business, it will likely lead to failure. As the famous saying goes “failing to plan is planning to fail”. Long-term planning is key to the success of your business. Having a comprehensive and actionable strategy creates engagement, alignment, and ownership within a company.
In order for you to move toward the path of success and avoid making these mistakes that lead to failure and bankruptcy, it is essential to seek professional advice. A financial professional has the experience to be able to offer input, guidance and strategic insights. This will be help your business succeed. The Acumen Group has over 30 years of collective experience and specialise in the ongoing support of entrepreneurs. Contact The Acumen Group today.
