The Top 10 Reasons Small Businesses Fail And How To Avoid Them

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There are currently more than 2.3 million small businesses in Australia. Unfortunately, an estimated 20 per cent of new small businesses in Australia will fail in their first year, and up to 60 per cent of start-up businesses will not survive beyond five years of launching.

To help give your start-up business the best chance of survival, we’ve asked BOQ’s business banking experts for their insights into the top reasons why small businesses fail and how to avoid becoming one of them.

Lack of research
One of the most common reasons for start-up businesses to fail is that there is no market need for their product or service. So, one of the most important first steps you need to take when you are setting up a business is to conduct research into everything from the existing market, current and future trends in your industry, to who your competitors are, who your target audience is and what will motivate them to do business with you.

Not having a business plan
“A good business plan can help you get clear on the direction of your business, identify strategies and an action plan for you to achieve ...
... your business goals, and help you secure the financial backing you need to start or grow,” said Martin Hoffman, BOQ Business Head of Corporate, Victoria and Western Australia.

Writing a business plan is an important step towards setting up your new business and achieving your business goals. On the flipside, without a plan your business is vulnerable to one of the most common reasons for small businesses to fail – mismanagement. Having a business plan will also help you stay focused and on track.

Not having the business funding they need
Running out of cash or not understanding what costs are involved in setting up and keeping a business running are a common trap for many small business owners. And the reality is that not every small business owner has the capital to cover the costs associated with starting a new business. So, understanding the fixed and variable costs associated with starting your business should be taken into account when you write your business plan.
Talking to a small business banking expert will help you understand what financial assistance you may need – whether you need to apply for a business loan, equipment finance or find out about government support for small business owners.
Tip: Never forget that ‘cash is king’. Even profitable businesses fail due to lack of cash flow, so it is important to negotiate across all aspects of your business. Don’t wait too long for your customers to pay for your goods and services, and always try to negotiate payment terms with your suppliers that are consistent with the cash needs and demands of your business.

Financial mismanagement
Aside from not having the business funding you need to start up your business, not understanding how to manage your cash flow or stay on top of all your financial responsibilities as a small business owner can be a recipe for disaster.
Cash management must be a top priority for small business owners because if your cash flow doesn’t balance out, you’ll find yourself in deep water fast. That’s a business risk you want to avoid at all costs.

Poor marketing
Unfortunately, many start-ups think it is a case of ‘build it and they will come’ when it comes to promoting their new business. A thriving small business needs a regular stream of sales and customers – and you need a marketing plan to do that.
Depending on the nature of your business and who your target audience is, a good marketing strategy will have the right balance when it comes to attracting new customers (acquisition) and building a base of loyal existing customers (retention). Striking a balance between ‘traditional’ offline marketing

Ignoring Analytics: Digital marketing relies heavily on data and analytics to measure the success of campaigns and adjust strategies accordingly. Ignoring analytics is a poor practice that can lead to wasting resources on ineffective campaigns, missing out on opportunities for optimization, and not understanding your target audience.

Failing to Personalize Content: Personalization is becoming increasingly important in digital marketing as consumers expect tailored content and experiences. Failing to personalize content can lead to disengagement, lack of interest, and a missed opportunity to build stronger relationships with customers.

Neglecting SEO: Search Engine Optimization (SEO) is a critical aspect of digital marketing, as it helps your website rank higher in search engine results pages (SERPs). Neglecting SEO practices can lead to poor visibility, low traffic, and missed opportunities for lead generation and sales.

Focusing Too Much on Vanity Metrics: Vanity metrics are metrics that may look impressive on paper but don't necessarily provide meaningful insights into campaign success or return on investment. Focusing too much on vanity metrics, such as social media followers or website traffic, can lead to misplaced priorities and ineffective strategies.

Ignoring Mobile Optimization: Mobile optimization is essential in today's digital landscape, as more and more users access content on mobile devices. Ignoring mobile optimization can lead to a poor user experience, high bounce rates, and missed opportunities for lead generation and sales.

It's important to remember that Digital Marketing is constantly evolving, so it's essential to stay up-to-date with the latest trends, best practices, and technologies. By avoiding these poor digital marketing practices and focusing on delivering value to your target audience, you can build strong relationships with customers, drive engagement and revenue, and achieve long-term success.