Recent research has shown that, despite beliefs to the contrary, most businesses don’t fail in their first year of business but in the years that follow. A recent report published via ASIC, show that the percentage of small businesses failing is on the rise, with owners struggling with issues such as cash flow, strategic planning and record keeping. Research shows that 51% of business start ups do not survive beyond four years of operation.
Some of the major primary causes of failure were poor strategic management, inadequate cash flow or high cash use, with many admitting that they are not keeping good records.
The following are some of the most common reasons a Business would fail in Australia:
None of these are reasons to avoid a business opportunity. But they are reasons for a business to be more thoughtful, more serious, and more strategic in the setup, planning and execution of a new business. If you struggle with any of these areas in your business seek the help you need either from a business strategist, financial planner, accountant or bookkeeper. Don’t keep trying to muddle through on your own.
The challenge faced by most business owners is understanding the market conditions for their industry and working out appropriate strategies to combat the areas which are not favourable to their business. Remember, it is just a matter of understanding your area of expertise and adapting to change no matter what the circumstances may be.
Disclaimer: The advice contained in Balance Books blogs and newsletters is of a general nature only and may not apply to your individual business circumstances. For specific advice relating to your situation, please contact your Accountant or other professional adviser to discuss further.