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Top 5 Reasons Why Businesses Fail Financially

As an entrepreneur, our brains are constantly churning. Constantly coming up with ideas on how we can help EVERYONE. Now as great a thing as this may be, it is also a not so great thing. Because it is these ideas that leads us to make mistakes that cause our businesses to fail. Mistakes that we don’t think about until it’s too late. We get so caught up that our eyes and ears are not open to the obvious. We’re so caught up in making it happen that we miss all of the warning signs. And as a result our businesses suffer. They suffer financially and by design.

But it doesn’t have to be that way. You can stop going down this spirally road that only leads to financial disaster. In order to stop though, you have to become aware of the reasons why you’re going through financial turmoil. And I think there are five key reasons that rank in the majority. The five reasons are often overlooked due to the sheer excitement of wanting to start your own business. What you have to remember is that excitement alone is not going to make you successful. It takes lots of planning and preparation along with blood, sweat and tears. No one wakes up a success. They planned it and worked hard at it.

I’m going to share these five reasons that I think are the most critical and I challenge you to take time and sit down and see which ones apply to you. Then take the corrective action and change things before it’s too late.

Here are the 5 key reasons why businesses fail financially.

1. No savings / funds. This is probably the number one reason why businesses fail financially. And it’s because, like I said already, of sheer excitement. You MUST have funds to start a business. A savings that you began many years ago; a retirement account or life policy you can draw a loan on; a home equity line; a rich relative. It doesn’t matter the source, just as long as you have a source. These funds need to be enough to carry you for 12-24 months at a minimum. The longer the better. Keep in mind that it takes time to build a business. It doesn’t happen overnight. So make sure you can provide a lifestyle while you building this business. It doesn’t have to be the “lavish lifestyle” you currently live and more than likely it won’t be. Just be sure you can pay your household bills and put food on the table.

2. No business plan. This is the one element of a business that no one wants to do. Yet it is the most needed. You need a business plan to be able to help you have a clear understanding as to what you want your business to be, how you want it to grow and who you’re going to serve. And this is only the beginning. It will no doubt tell you and any potential investor a whole lot more. This business plan will serve as the roadmap and guide for how to take you business from a caterpillar to a butterfly.

3. No clients. Now this one was a no brainer. But I want to touch on because I want to point out that, yes it’s important to get new clients when you are starting you business but it’s even more important to keep those clients. Your daily goal should be not only how to get new clients but also how to keep your current clients. There is nothing more rewarding than knowing that you have a base of clients who not only continue to use your services and products but who are also raving fans and will refer you to the world.

4. No systems / structure in place. Every successful business has a system in place. A system that everyone in the business from the owner to the lowest man on the totem pole follows. This system creates synergy within the business that leads to nothing but pure abundance. Having a tried and true system to follow allows you to operate your business more efficiently and effectively. Think about McDonalds and Starbucks. No matter which one in the world you visit, the system remains the same.

5. Not understanding the numbers. This reason why businesses fail financially is probably the least recognized. Many business owners and entrepreneurs start a business and never take the time to learn how to understand it and manage it on paper. The can manage the daily operations of their business beyond measure. But when asked what their profit margin is they respond with a “huh?” When asked how their business is trending compared to prior years they ask “what’s trending?” Understanding the numbers of your business tells you more than how much cash is in the bank. It tells you where you money is being spent and how your business is truly being financed. It helps you strategize on where and how to make improvements.

What is causing your business to fail financially? What changes are you going to make to turn things around?

Columbus Offers Businesses And Residents A Great Place To Call Home

Columbus values all businesses regardless of their niche, or their purpose. The world’s largest private research and development foundation called Battelle Memorial Institute; Chemical Abstract Service, as well as the largest single breed horse show event in the world, called the Quarter Horse Show, as well as the largest university campus in the nation, belonging to Ohio State University, have all gathered in the same state. For such reasons, and many more, Columbus has made it to the top lists such as the best place to raise a family, or the best city for working moms, or the best place to start a business, and other such lists.

A quick search on an online business directory for Columbus, reveals businesses varying in size, and purpose as well as origin. Columbus makes a point to work with international investor and companies and help them build a successful and thriving business. At the same time, Columbus business regulators also makes it easier for small businesses and bigger companies by having more relaxed rules and regulations than some other states. Columbus businesses divide to many different categories such as technologies, non profits, food, fashion, banking, etc. Each of these categories include hundreds of businesses within Columbus giving the city a busy and alive look.

Columbus has diversity when it comes to its people, its businesses and even the opportunities it provides for businesses to expand or advertise for their products. The city’s large selection of radio stations, provides a variety of advertising options. Moreover, while the city only has slightly under 800,000 people, it succeeds in attracting many tourists every year through its different cultural, educational, and athletic events such as the State Fair, research seminars, football games and special events such as the Quarter Horse Show, and Arnold Classic. The State fair brings over 700,000 people from all over the state to downtown Columbus, and the Quarter Horse Show brings half a million people from all over the world together. The heavy foot traffic for these events brings new advertising opportunities for different Columbus companies, as well as it creates a great opportunity for new businesses to increase their brand recognition. It also brings more demand for the tourist industry, bringing businesses to airports, hotels, taxis, as well as restaurants, gift shops and other local businesses.

With a combination of tactics, and having an environment of healthy and diverse competition as well as advertising opportunities, Columbus makes a fertile ground for the growth of any business. In fact, when the recession hit the United States in 2007, Columbus, was not impacted as greatly as most cities were. Columbus businesses and companies are accessible through any online business directory, and the laws and regulations of doing business or opening or starting a new business in Columbus are also available online. Columbus is the home to many large companies and businesses and can be a wonderful destination and a path to a new beginning for those who are in search of entrepreneurship or other types of business opportunities.

The “WHY” of How To Start a Business

How to Start a Business is a big question asked by a lot of people. Why? Well, it is because a lot of people have aspirations of running their own business. It may have been something they wanted to do since childhood, or perhaps something they were exposed to in school, or an idea that came to them while working for someone else. Whatever the reason, starting a business is a lofty goal and knowing how to start a business is the foundation.

There are three basic philosophical questions to answer before starting a business. Of course, these questions are broken down into many other smaller questions, but for our purposes here, we will discuss the basics. They are:

1. The Operation

2. The Motivation

3. The Culmination

First, the Operation. The obvious and most basic question starts here. What is the business? This may seem elemental, but really, it is the most important question. Many people have a plan to start a business. Some want to start a business because the business makes lot of money. Others want to start a business because the business is something they love.

These may appear to be good answers to the first question, but in truth, they are not. Not at all. Why? Because making money is a benefit but doesn’t necessarily give you a life. Doing something you love is a benefit but won’t necessarily give you income. The answer to this most basic question must be something which encompasses both.

Making money in a business that is boring and monotonous is a mistake millions have made. A life of making money in something you have no concern for or even despise will make a bitter person out of you. So you may have money, but if you cannot enjoy the making of it, where is the benefit?

Running a business for a product or service about which you are imbued with passion but can barely pay the bills is an exercise in futility. Ever known someone who did this? I have. They struggle to remain in a business simply because they like the doing of it. These people have confused a business with a hobby. One makes money; the other is for kicks.

The right answer to this most basic question is a business for which you really care or enjoy, and has potential of making good money. If it has both these qualities, it may be the right choice.

The second question in the quest to find how to start a business is the Motivation. What is the motivation for your venture?

In other words, if you had to summarize why you are taking on debt, working endlessly, depriving yourself of free time, and bearing substantial responsibility, what would the answer be? This most crucial step is one which cannot be ignored. Assuming you love the subject, and the business had a track record of money-making opportunities, if you can address the why of your venture you have answered many, many potential questions that will surface down the road.

Do you wish to change something about your world? How about your specific industry? Does the business provide for the particular needs of a specific group of people for which you deeply care? Does it better the lives of people, or does it increase the effectiveness of people?

Whatever the motivation, it needs to be something about which you feel you were created for. It must be “you” to the core. This concept runs far deeper than merely enjoying the subject of your business. It is more about the inner motivation which drives you onward. It is the essence of what the business is about.

If the business you are contemplating is something you enjoy, something that makes money, and something which fills your heart and mind with ideas and plans about how it can impact the world, it just may be the right choice for you.

But there is one more thing to consider.

The Culmination.

The culmination of your business is the peak, the highest point, the “future” of your business. Put into a question, it is: where is the business going?

Someone may love the newspaper industry. They may love to write and edit. They may love to cover current news and tell stories. They may even work in an area of high newspaper subscriptions. But one who would consider starting a newspaper today is most likely ignoring the culmination step.

It doesn’t take a research team to figure out where the newspaper industry is going. It’s not up. It’s away.

For someone starting a newspaper franchise 4 decades ago, the future was bright and that person could make a lot of money if done right. But not so anymore. It might have been a wise goal at some time in the past; today it most likely a trip to failure.

So a substantial consideration in the quest for the perfect business involves looking to the future of the business, and asking the simple question: where is the industry going? While no one can see the future or know if a certain industry will still be here in the days ahead, we can make educated guesses that will greatly influence our profitability.

Some businesses never seem to fade or expire or lose their appeal. And others never seem to last more than a decade. Yet most businesses have a “peak”. They have a period during which they will produce more and have more impact than at any other time.

It is your job to determine with some certainty when that time is. Is it in five years, is it two decades, or is it impossible to know?

If you can take these most basic and fundamental steps and answer these questions with clarity, you will have likely saved yourself time and money and heartache in your search for the perfect business. Knowing how to start a business begins here. And after these first elemental steps are complete, it is then time to move into the more specific questions of tax implications, business entity structures, and other such considerations.