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Seven Reasons Why Most Businesses Fail and Why Most of It Has to Do with Capital

Seven Reasons Why Most Businesses Fail and Why Most of It Has to Do with Capital

According to statistics, around 80 percent of entrepreneurs fail within the first 18 months. The few that are left to succeed do so simply because they have the resources to keep their organizations running. Yet, that doesn’t mean the company will last forever.
In fact, many go out of business within a few years. Still, one of the most critical aspects of fueling a business is working capital. In addition, you need a vision and physical resources. Keep reading to learn more.

You Haven’t Created a Profitable Business Model

Overall, the reason your ship will sink is due to a lack of profit. Even if you have the right vision and a niche idea, it takes cash to make cash. Many times, this is a learning process with many mistakes made along the way.

Often, all you need is a bit more capital to keep operations afloat until profits start coming in. It is imperative to be effective in managing finances from day one. Plus, every facet of your business must have a budget assigned.
Moreover, unnecessary expenses should be avoided. It goes without saying that many startups have limited resources.

And, when time is money, companies must understand how to do more with less. Nonetheless, there are still a few options such as receiving capital based on your revenue.

You Are in Panic Mode

It’s difficult to operate a successful business when it seems as if chaos has broken loose. It’s just too easy to feel as if the business is crashing. Perhaps you only have enough capital for the next couple of weeks.

Well, the last thing you should do is to panic. This will only lead to irrational decisions. When you look at the bigger picture, you are already doing better than most since you were able to turn your dream into a reality. The key to survival is to find alternative resources as soon as possible and to keep a level head.

You Aren’t Prioritizing Your Options

Again, when the business isn’t going as swimmingly as you would like, it would be easy to simply throw in the towel and give up. Perhaps you have already been turned down for a traditional loan. Well, the good news is you still have options.

You just need to organize your choices by priority. Create a doc with the most pressing issues that must be addressed immediately. Determine the projects and departments that need the most money. Make a list of the many ways to obtain funding for operations. And, figure out how to cut expenses right away.

You Aren’t Disciplined

Running a successful business takes discipline You can’t blow money or fund every idea that pops into your mind. Without discipline, it’s difficult to fare well even in a good economy.

With self-discipline, you can create a hearty work ethic, which leads to getting things accomplished effectively. Not to mention, it is essential to have all your staff aligned with that discipline to help push the business forward in the key startup years.

Tip: It helps to do more than build a business, you want to create an alignment map.

You Aren’t Determined

Regardless of your business size, strong determination will guide the ship. You must be a business that never quits–someone that explores each and every avenue for reaching success.

The road will get bumpy and frightening. You will have problems you’ve never faced before. You will have to overcome obstacles you’ve never climbed in the past.

You may even get to a crossroads where you can either sell your business or look for capital to keep it running. These are all tough situations, but there are also solutions.

Yet, you won’t reach the right solutions unless you have determination. It takes the right people, with motivation, to steer the startup to success. And, another key aspect is the necessary persistence to make this happen.

You Won’t Adapt to Change

All startups, especially the best ones, must be willing to adapt to changes and new technologies. As a result, you might achieve major breakthroughs.

Furthermore, you will never know unless you try. In the early years, you will need to revise your product and messaging many times until you master the secret of getting it right.

You Try to Run on Inadequate Capital

The blood line of all businesses is cash flow. Sputtering along just isn’t going to cut it. You need enough capital to run business operations. In fact, the primary duty of the founder and/or CEO is to ensure there is enough money in the coffers.

You don’t want to decrease morale and zap energy because there is never enough money to get the essential projects completed. Plus, there isn’t any question that worrying about money is exhausting.

In Conclusion

Given that fact that most businesses fail within the first 18 months, it seems important to understand why and how. As a result, you can ensure your business is booming and not just another statistic.

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