Any savvy business owner is well aware of how difficult owning and operating a company can be. Whether your company is service-based or if you provide a physical product, all businesses have their growing pains. There are many external factors that can lead to failure. However, many of these factors are self-induced. That is to say, most businesses fail do so from the inside out.
Common Factors of Business Failure:
As a new business with little to no credit history, suppliers typically require payment before delivery or might send inventory via C.O.D. If a company offers their customers terms, additional funds may be necessary in order to bridge that gap. When offering these terms, accounts are typically given anywhere from 30 to 90 days before payment must be made.
Setting the price of products and services can be a complex process. Business owners need to do research and have an understanding of their market conditions, margins, expenses and competitors. Sadly, many new companies fail to take all factors into account. Many businesses are measured by sales and revenue. Businesses operating on low profit margins run less efficiently than those with high profit margins and must consistently keep the bottom line under a microscope. Failure to do so could be catastrophic.
Every business will inevitably have to deal with competition. Today, with the onslaught of more and more competitors, online, businesses no longer have the luxury of concerning themselves with local competition, exclusively. Companies must focus on creating new marketing campaigns and take advantage of their competitors weaknesses.
As a business grows, so does the need for willing and able employees. Many small business owners struggle with transitioning from jack of all trades to overseer. However, bringing on the right staff and learning to delegate is a crucial step any successful business person must undertake. With that in mind, the average cost of an employee is approximately 1.25 – 1.4 times the cost of the employee’s base salary.
When developing or manufacturing a physical product, businesses will likely be using specific equipment. Expanding, needing to repair or replace equipment will eventually come up. Depending on the type of product being produced, this can be a costly expense.
How to ensure business success
The statistics speak for themselves. With the potential pitfalls, constant increase in competition, business owners must keep their eyes on the prize. Keeping inventory [and cash flow] on hand, establishing that your prices are in check and keeping an eye on the competition are all important factors.
If equipment is a vital part of your business, consistent maintenance schedules are a must. Having the right people in place to delegate is also important in order to keep your company running like a well-oiled machine.
Here at First Union, we offer multiple solutions, custom tailored for you and your business’ needs. If you would like to talk with one of our finance specialists, contact us here or call us at 863-825-5626. If you’re interested in growth, you may also be interested in getting a free business valuation, which you can access by clicking here!