Partner Article

Ten tips for avoiding business failure

Everyone knows that the statistics about business failure rates make sober reading, and these days everyone can cite a business (not necessarily a small one) that has been forced to close. In general although statistics quoted vary, most people agree that one third of all new businesses cease to trade within three years of starting up.

However the good news from commercial market analysts Equifax published in October 2011 is that business failure rates in the North East of England demonstrated a ‘Quarter on Quarter’ drop of nearly 15% in Quarter 3 of 2011 making our region the most resilient in the UK. See www.equifax.co.uk/About-us/Press_releases/2011/10_17_01-BUSINESS_FAILURES.html for more information.

So why do businesses fail? There are many varied reasons why businesses fail but if you are aware of some of the pitfalls then you can adopt strategies to side-step them. So looking at just some examples of the reasons ‘why?’ here are ten tips for avoiding business failure:

- Ensure that you communicate effectively with staff, partners and customers so that objectives are clear – lack of vision, direction and leadership often leads to failure.

- Carry out on-going market research to keep up with trends and customer demands – retaining a competitive edge is crucial in a challenging marketplace.

- Plan your business strategy and manage and administer the organisation efficiently and effectively – failing to plan equals planning to fail.

- Carry out a process of due diligence if engaging with a new supplier or large customer to ensure that they are reliable and financially sound – this also applies to buying an existing business or entering into joint ventures as you don’t want to find any nasty skeletons in the cupboard at a later date that could destroy your business.

- Make sure you have both a consistent marketing strategy and plan and carry them through – lack of adequate marketing effort and skill leads to no customers and no business.

- Ensure you have sufficient cashflow and working capital to keep the business going if times get tough – remember the cliché that ‘Cash is King’, and that customers don’t always pay up on time.

- Check your pricing policy and make sure that you remain both competitive and profitable – but competing solely on price is a risky strategy as your products and services may appear to be ‘cheap and nasty’ and you may not generate enough income to make a profit if you have underestimated your overheads. Remember customers usually like quality and value for money too.

- Don’t overtrade by selling more goods and services than your cashflow position can service – walk before you run and don’t expand too quickly as your cashflow may not be able to keep up and you risk losing customers who won’t wait for you to be able to supply them.

- Be careful of having all your eggs in one basket – whether suppliers or customers, or if you do then watch that basket very carefully.

- Don’t be an ostrich – ignoring problems won’t make them go away, it will just make them get bigger – being flexible and adaptable is the key to the ‘survival of the fittest’.

To avoid becoming yet another of those business failure statistics think about taking stock of where you are, review the suggested tips and pull together an action plan to focus your future direction.

For more information and support in starting a business in Northumberland contact NBSL on 01670 813322 or visit our website at www.nbsl.org.uk

This was posted in Bdaily's Members' News section by Phil Langton .