There are no adverse circumstances in a business routine. A business is meant to be profitable. But businesses fail too. I like closing down sales as a matter of fact.
Businesses that get destroyed within first 18 months of inception are because they spread themselves too thin in their product or service offering. More recently, I saw how a crowd funded startup failed besides everything was apparently right. See product: Flash Pack.
Running a small business is like doing a life-long MBA. Cash flow management is a very critical factor here. If there is a reasonable flow, even a failing business could get back on its feet with strategy and discipline. Cash flow, however, is not the only single reason why small businesses never reach a sustainable point of operations.
Growth relies heavily on continued and improved action. Where as, sustenance depends on prolonged action with the initial inception plan. Entrepreneurs can perform the first task of inception amazingly well. And because they are capable of that, the management needs a separate group of people. That group of people, popularly known as “Managers”, should be brought into the system and allowed to take shots to run the business. With complete freedom they can do wonders; however, if entrepreneurs get too attached with their business and curb that freedom, then it simply sets a plan for failure.
Dependency on angel investment and venture capital can not be stroked out of the context. I do feel that in the spirit of “offering freedom to managers”, these managers are being brought in by venture capitalists as a way of ensuring that they have better control of their investment. That is how founders (entrepreneurs) are being moved to board membership or chairmanship but away from the original CEO role.
After some time, entrepreneurs become prisoners of their own success. There is limited or no action they just keep hailing their initial plan if it worked for them. I believe, there has to be a lifestyle choice to stay in the uncomfortable territory of the unknown. Additionally, purpose and a sense of mission provide the resiliency. With improved operations management one can revive this sense and purpose fully.
They fail to introduce good people to the team. Owners will always push the business forward, but that doesn’t mean their decisions are the right ones. It can be easily understood how ditching overtime benefits everyone. The owner needs not spend 18 hours on the startup all the time. Good staff will not only subscribe to a company vision, but also want to try new and different things to make it even better. It also helps from a human point of view; different personalities and different values can often change the way a challenge is approached and overcome.
If the user selling points for some business were so unique at the start of a business, it is deemed to loose the competitive edge after sometime. Because if they were good enough other people would adopt too. But if they added no more than a certain proposed value, small businesses usually adopt to the status quo for quick values that added more potion to the magic recipe. Once they fail to vitalize the initial promises made, they opt shortcuts.
These small businesses may find a gap, and offer a specific solution to one aspect of that gap but they fail to do the market research on wards. Most often small businesses have no clue of who their customers are. Therefore they have a generic strategy for a generic customer profile, which often does not translate into sales.
Platformization is another issue where these small startups start to panic and collapse. Their displays are virtual environments and they do not have access to hyper markets like modern trade or local modern trade. Small businesses tend to loose marketing strategy. The aftersales support, they tend to outsource. Thereby loosing their flexibility and touch with the client. Inflexibility is detrimental cause of failure. You can’t stay married to a failing idea. Small businesses usually need to iterate toward a successful business model. Rarely do they start with one.
Their channel strategy is not uniform. The performance data is not certainly available for analytics. They big distributors or dealers would tend to support you less if they have a small credit line or overall business proposition with your business. So the secondary sales data is not readily available. Until at the extent of merchandizers you can not hire.
As a ray of hope, not all business closures are ‘failures’, as there is a vast array of reasons why business owners move on that aren’t negatively driven. Even if you leave your business with less money than when you went in, the other gains and successes (knowledge, connections, abilities etc) you leave with, are priceless and can be applied else where.