So, your micro business failed. It happens. It is actually more common than you think. In Nigeria, it has been recorded that more than 60% of micro businesses failed within the first and second year of their creation. According to Business day in this article Nigeria, one of the three countries that have the largest hubs of start-up creation in Africa, has experienced a large amount of business shutdown, much more than the other two countries (South Africa and Kenya).
How you respond to your micro business failing will determine if you will bounce back and have a successful business or if you will become one of the statistics of people who had a business that failed. Many of the successful entrepreneurs today did not get it right in their first attempt at operating a business.
Jason Njoku, for instance, the co-founder of Iroko TV started a blog network, T-shirt business and web design company that all failed. Tom Ford, the creator of Ford Motors had two automobile companies that failed before his Ford Motor company gained success.
How did they go from failed businesses to extremely successful enterprises? The answer is simple: they learnt from their mistakes. They took time to evaluate the businesses to know the reasons they failed.
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Understanding the reasons why your micro business failed and learning how to do things differently is crucial to turning the tides and becoming successful the next time around. Also, for those who are about to start a business, understanding this could help you avoid having a failed start-up.
This article is aimed at spelling out four reasons why micro businesses fail and what to do to have a different outcome.
1. Having A Weak Unique Selling Point (USP)
It is possible for your business to fail even if you’ve got an amazing product or service that has a strong market demand. This could be as a result of having a weak value proposition or being mediocre in your approach. Basically, you are failing to stand out in the crowd where there’s a lot of competitors and a strong demand in that market.
What sets your business apart from competitors? How do you conduct business in a way that is totally unique? What are your competitors doing better than you are? Develop a customized approach or service package that no one else in your industry is using so you can present it as a strong value proposition that attracts attention and interest.
2. Financial Management (or the lack thereof)
You must know, down to the last dime, where the money in your business is coming from and where it is going to in order for your business to succeed. Your business can also fail if you lack a contingency funding plan, a reserve of money you can call upon in the event of a financial crisis. Sometimes people start businesses with a dream of making money but don’t have the skill or interest to manage cash flow, taxes, expenses, and other financial issues. Poor accounting practice puts a business on a path straight to failure.
Keep records of all financial transactions, including every expenditure and all revenues received, and use this information to generate income statements (profit and loss statements). This is valuable information that you need to run your business, know where you stand at all times. If you lack skill in financial management, consider hiring a small business advisor and professional bookkeeper or certified public account to help manage your financial affairs.
3. Not Understanding Customer Needs
A business will most likely fail if a business owner consistently neglects the needs of the customers and the feedback they give. Even though they like your products and services, some customers would prefer if you changed a feature or altered a procedure. Some important questions to constantly ask yourself are: What are the customers saying? Am I listening? Is the market declining? Are they still interested in what I’m selling?
Keeping an eye on trending values and the interests of existing and potential customers could determine a successful business. Using CRM (Customer Relationship Management) tools, you can always keep up with current trends and changes in the market. Also, you can survey customers and do market research finding out what their interests are. Effective use of CRM can help keep your business from failing.
4. Bad Business Model
Some businesses attempt to build their companies on a business model that is not wholesome, that contains a lot of flows. They operate without having a proper business plan. They go after businesses that show no guarantee of producing a revenue stream. Sometimes they have a good business idea but implement it without any good strategy in place causing the business to fail.
Find out how other businesses in your industry operate by making research and reviewing them. You can create a detailed business plan that contains financial forecasting based on strategic marketing, predictable revenue, and challenge management solutions to overcome competitor activities and potential obstacles. In order to solve problems as they occur, stay on track and measure success, you should create a milestone chart with specified goals and objectives assigned along the timeline. Avoiding business failure is a function of having a sound business model that incorporates business best practices.
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OG Capital is a micro business development company that provides business plan frameworks for micro-businesses in the key industries that they operate. We rely on thoroughly researched data which provides insight to local business processes and reduce business risks. We give adequate business projections with cash flow statements, balance sheet, business valuation, profit and loss statements, market analysis and SWOT. You can think of us as the doctors for your business,
If you have no idea how to run a business or you need some insight on an aspect of your business or you are venturing into a new market or you just want a well detailed business plan, OG Capital can equip you with the knowledge you need to not only successfully and effectively operate your business but also scale the business and expand.
My name is Emmanuel Ejiga. Content lead of OG Capital
I am a writer. Technical writer, song writer, and sometimes fictional writer.