Why Some Businesses Will Fail This Year


January is always an interesting time for retail analysts, in particular, with many stores revealing how they have performed over the course of the critical Christmas period. Those who have failed to produce the expected sales levels are quickly declared to be “losers” in this great game, with the expectation that they face a tough year ahead.

For many small business owners, however, such tales can seem like they herald from an entirely different planet. You may be facing your own challenges, which are likely to be distinct from those that are the focus of attention for big retailers and multi-nationals.

The reality is that failing businesses tend to have an enormous amount in common. Although the scale of individual enterprises will vary, the difficulties that they face are often remarkably similar. What this means is that there’s usually scope to learn from the problems that bring others down. As an entrepreneur, you’ll know that there is great value in learning from mistakes; there’s certainly no harm in learning from the mistakes of others.

So what are the issues that will afflict businesses this year? I would suggest that they can be separated into the following clear categories:

A failure to adapt

With the advances being offered by technological developments, it can be argued that businesses are currently facing a rapid pace of change. There are inherent dangers that are associated with the nature of such changes.

As a result of the fact that an increasing number of people are able to access the Internet, particularly making use of mobile devices, it’s apparent that we are seeing significant changes in the way that people choose to behave. If more people are shopping online, for example, then it stands to reason that a retailer who fails to provide an online store is heading for trouble.

Those who fail to adapt to changes often believe that they already have perfect solutions in place. I would argue, however, that this is rarely true.

Ignoring the competition

Some successful entrepreneurs would recommend spending all of your time on improving your own business. This may imply that it’s unnecessary to give any consideration to what competitors are doing, although I would stress that this is a mistake that you can’t afford to make.

It would be lovely to do business in something of a vacuum, released from the problems that are caused by a competitive environment. You would have easy access to customers and could charge whatever you like for products and services. As a business owner, there is little doubt that such a situation would make your life easier.

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But we all know that reality is somewhat different: our customers are making an active decision to buy from us, rather than choosing to spend money with our competitors. In order to understand why this should be happening, it’s absolutely critical that you know about what your rivals are doing. That means spending time investigating their approaches and their pricing strategies.

It’s easy to become obsessed with competitors, but it can often be fatal to ignore them.

An inability to deal with cash-flow issues

When you think about the definition of a successful business, you often tend to think in terms of profit, or even turnover. Judging any criteria on the latter metric tends to be a mistake, but I would also suggest that paper profits only tell you part of the story.

It doesn’t matter how many clients you have on your books, or how much income you expect them to contribute over the course of the year, if you don’t have the money that’s required to continue trading. The truth is that a failure to handle cash-flow correctly can kill your business, even if you believe that you are in position to be successful.

Don’t get too carried away with planning for the future, unless you can be certain that you have dealt with the short-term requirements that are so central to your chances of success.

Keith Barrett works with Total Franchise and sees the way in which successful businesses work. It’s his belief that learning from business failures can really help to produce impressive results.