Why do 1st time businesses usually fail??

Question

What are the common mistakes??

p.s. im goin into the interior design and real estate field

Answer 1

Lack of a cohesive business plan......and failure to execute it....

Answer 2

lack of business know-how is probably a main thing. most people who start a business are doing a job they know all about, but this time they're the boss! so they know all about the work they do and are probably great at it, but have a lack of understanding of how to actually run it as a business.

I'm bet financial awareness is high on the list too, if you fail to plan or forecast correctly, or do not keep accurate records and keep an eye on finances then it can soon go down the pan! keeping an eye on finances means you can take action early on if needed.

marketing will be another reason - some people don't know who they're selling to, or why buyers are buying from them, and often people pay huge amounts of money for advertising which isn't bringing in great results - people need to get more creative with their marketing, and if something isn't working they shouldn't be afraid to stop doing it just because it's the norm for their industry!

for free business advice try http://www.newbiztips.net/gotwhatittakes.aspx

Answer 3

I think many people don't appreciate what a business is: its a 'money making engine'. It isn't about having a website, or great shop front or nice decor in yr cafe or great business cards or a cool letterhead...or a van with nice graphics. You need one or preferably more linked systems for generating income. I knew a guy who did millions of pounds of business from his spare room. I saw another man put all his savings into setting up a chic high-end cafe in a run down street. So I think the flaw is that people don't see their business in the right way. They set up something because they want to do it and then they think, right better do some marketing, better do some advertising etc. Sometimes this works but by accident I think.

Answer 4

As the question suggests the answer FIRST time business is the usual failure --- as the business man gathers experience he will be more able to take up tough challenges

the usual failures are
the person and allies who help him to execute the plan shows the glossy part only , being first time he do not expect variances from plan much

then he gathers his full streangth in finance for the margin money and ventures into bank and other source of finance in very next step

with proper security backing the banker is too willing and eager to assist you any pipe dream project

now when it comes to reallity many unexpected demands and unforeseen demands on funds come up

the 1st time do not expect and is in a position to satiate the additional demands and there the things starts going wrong

the first entity to pull bridge is the financier - and you loose your breath

ADVICE
Limit your venture commit ment 50% of your financial capacity , you leave a liquidity to yourselves
with 50% as margin you avail a bamk loan or other institutional and personal finance

so the size of the venture should be for egxample
if you have 100000 liquidity keep 50000 apart and 50000 you invest in as margin , now go for a bank finance of maximum 250000 so the Total Invest ment required should be ( Including working Capital ) be limited to 300,000
GOOD LUCK

Answer 5

The #1 reason a new business fails is because the owner did not have a handle on the finance end of the business. In order to be successful you need to have experience in the industry, know your market and above all, know how to run your business from the financial stand point.

If finances are not your forte, find someone suitable to handle this portion of your business. You may want to check out the Small Business Administration website before you launch your venture. You can find them at www.sba.gov

Best of Luck

Answer 6

I don't think it's necessarily just first time businesses - I think it's something like 50% of all businesses don't survive their first year.

Some common mistakes:
-Trying to grow too fast too quick: In the short term it's better to remain small and busy then to try to expand too quickly.

-Being too optimistic about the demand for your product. Rather than trying to look at best case scenarios, it's better to focus on trying to make your "nut" each month (your nut is essentially your fixed costs that need to be met each month).

-Failing to advertise: One of the biggest mistakes a business - especially a struggling business - can make is failing to advertise. You have to let people know you're out there and what you have to offer. When you cut your ad budget because times are tough, you're basically shooting yourself in the foot.

-Inadequate cash flow: You have certain fixed costs that have to be met each month - insurance, utilities, rent, etc. If you don't have cash reserves to pay these expenses until your business starts making money then you're doomed. If possible, work out of your home until your business takes off and don't hire any employees as long as you can run the business by yourself.

Answer 7

The main stumbling block we came across was not understanding advertising.

If we had been in a less stable position we would have gone under.

Make sure you do your market research. Advertise in the right places. Know your audience and what they are looking for.

Answer 8

Inadequate planning. not knoing the demand for their business, or not knowing the competition.
Inadequate financing.
Lack of understanding of the committment required.
Trying to mix business skills with friendship.
Inadequate record keeping, obtaining of permits, lines of credit.
=among others

Answer 9

CUSTOMER SERVICE- work with your customers/ clients and insure that they are happy but don't give away your services! I had a business for 25 years and my son took it over. We started from scratch, we never had to advertise- we got all of our customers through word of mouth. Don't burn bridges behind you. One unhappy person will complain to 20...one happy customer will probably tell 5...

Answer 10

Cash liquidity is the first important element. Forgetting to pay yourself a wage (I'm serious) is the next

Answer 11

busines planning is required

cashflow is the biggest downfall of most small businesses within 5 years