Business failure is one of the biggest threats modern entrepreneurs face in today’s competitive business environment. According to The Telegraph, 20% of startups in the UK fail within their first year, so things don’t always work out for some unlucky business owners. However, the discouraging rate of failure should not hold you back from bringing your business idea to life. You can simply examine the reasons why these new businesses fail and ensure that you avoid the common pitfalls or take certain decisions that bring long-term success instead. Below are some effective tips to lower your risks of business failure.
Make clients the heart of your business
Gartner estimates that 80% of a brand’s revenue comes from just 20% of its patrons, proving that loyal customers are the bedrock of success stories in business. Losing your loyal patrons is one of the biggest financial risks of venturing into business since fewer customers mean fewer profits. Therefore, do all you can to avoid upsetting your customers in any way possible. Also, involve your clients in marketing campaign planning, product development, and general business strategies. In addition, consider their viewpoints and accept their feedback to show how much you value them, reducing the likelihood that they would ditch you for your competitors.
Consider franchising
Becoming a franchisee is undoubtedly an excellent alternative to going solo if you wish to establish a business that is less likely to fail. As a franchisee, you will purchase brand rights from the franchisor for an initial fee and pay ongoing marketing fees and royalties. Generally, a franchise business is less likely to fail because you will benefit from a proven business model with tried and tested systems that you can readily follow. You are joining an already successful brand that sells in-demand products and services and a network that will give you advice and support when needed, reducing your chances of failure. Franchise Direct and other trusted websites make finding the right franchise opportunity quite easy, so keep this in mind.
Manage your cash flow efficiently
A whopping 82% of all small business failures are due to cash-flow problems. Indeed, it is hard to imagine how your business will last beyond its first year and continue thriving without consistent cash flow. As such, it is essential to have enough money coming in to pay key expenses. You can manage your cash flow better by forecasting how much is coming in and going out. Then, use this forecast to project likely expenditures and sales to have a fair idea of what you should have in your bank account. Taking deposit payments in advance, sending out invoices on time, and quickly following up with clients who fall behind on payments are other essential aspects of efficient cash flow management.
Obtain insurance
Smart business owners always hope for the best but equally prepare for the worst. Therefore, get insurance cover for your company to protect it from the risk of losses due to fire, theft, and natural disasters like floods. Your business can also get sued for various reasons ranging from a breach of contract to an intellectual property rights issue. Therefore, insurance cover is necessary to absorb the costs of lawsuits and ensure that you have enough money to continue operating.
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