Why Businesses Fail

Why Businesses Fail

Why do businesses fail? They run out of cash! It's just that simple! 

Of course there are other reasons like bad management, not researching the competition, not having a plan, not pricing properly, etc. but really, it all culminates into one major result.

  • If you have bad management, chances are there will be an improper use or channelling of funds or losing good people which can turn into huge hiring costs on training new staff.
  • Not researching the competition will probably result in your business losing customers to the competition - so no inflow of funds.
  • Not having a plan - massive recipe for disaster because without a plan or a budget, you will have nothing to guide you.
  • Not pricing properly, - goodness, that is another story for another day!

The summary of all this is when you have negative cash flow because you are spending more than you are earning, you will run out of cash and the business will fail!

If you're at the point where your business is on life support, well first - take a deep breath! We've all been there and you will get out of it! You just have to know what to do so you can retrace your steps! 

So let's start from the very beginning to understand the real reasons for cash flow problems and what you can do about it.

No matter how good your business plan is or how talented your team is, things can always go wrong. No business is immune to failure, but by understanding the most common reasons why businesses fail, you can take steps to protect your small business.

One of the most common reasons businesses fail, like we said earlier, is due to cash flow problems. Not having enough money to cover your expenses is a sure-fire way to go under, and it can happen to even the most well-run companies.

Cash flow problems can stem from a number of different issues, such as not bringing in enough revenue to cover expenses, not being able to get paid on time by customers, or having to make large capital investments upfront or spending money on the wrong things! 

In my free book, 7 Mistakes to Avoid as an Entrepreneur this was my Mistake No 4!  Classic reason on why businesses fail. So let's focus on 'spending money on the wrong things for a bit!  I wish I really understood years ago when I started my business - watch your costs like a hawk!

While it's obviously hard to build something new without the resources to do so, spending money to make money only works if you are spending on the right things. Whatever you do, do not fall victim of unnecessary spending! 

Getting a space when you don't need to or can't even afford it , buying expensive machines without knowing where business will come from or premature hiring will all leave you crying premium tears. Save as much as you can in the early days till your businesses is strong enough to get to the next level.

So ask yourself these questions:


Getting an Office Space:

Do you really need that office?  You do know it won't end with just the space right? You need to renovate, furnish and do some nice interior decor. And then add the extra electricity, utility and maintenance bills and it does rack up pretty quickly. 

At this point, how exactly will this new office generate income? You might feel you need a professional space to meet with your clients but how about using a virtual office in the early days? Or go out to meet the customer? Or work from a hub?

If you are a fashion designer who needs a production space, there are sewing hubs you can use in the early days to save yourself the huge expense of renting a place. Or you can work from home and meet your client in their space. It probably is financially wise to start with that.

Of course, if you are financially capable of getting a space, please go for it.


Getting expensive tools:

Do you really need those machines? Or that printer? Far too many small business owners buy things they don’t necessarily need.  They either buy tools they don’t need, or buy tools that are bloated with features they don’t use and may never use.

Better to purchase something that would suit a business of your size as long as it saves you a fair amount of money while being equally as effective.

Which brings me to another point. Try purchasing things that give the reasonable amount of benefit at that point in time with minimal cost - and which are directly related to revenue generation.

For example, you might want to use the free version of things and only upgrade when you have the stream of revenue to justify your upgrade or if you need some additional features that are important to your business.


Premature Hiring: 

Mistake No 3 that I highlighted in my free ebook, 7 Mistakes to Avoid as an Entrepreneur.  Like I said - been there, done that! It might seem tempting but don't hire until you absolutely have to. And the person you hire must either be able to increase revenue or reduce costs. 

Do you really need that PA to run those personal errands? I remember when I first started, I felt I needed that driver because I could not cope with the traffic. Well, turned out, I didn't really need him after all. I didn't move around often. After he left, I didn't get another driver. Turns out I just wasted all that money in the early days. 

If you don’t need it, then don’t do it. Hiring people too quickly makes you burn cash faster than you need to. In fact, staff costs tend to be the highest expense of a company.  Yes the temptation to get a sales and marketing team to boost revenue might be high, but if you can outsource it or get someone part-time, better for you.

Put into consideration which is more cost effective for you before you make a full-time hire. Don’t hire a full-time staff when you don’t have a full-time job for them. 


Premature Scaling: 

Lastly, do not scale prematurely. Let's put it simply using the earlier example. Do not go paying for office space before you have employees to fill it. Start small and grow gradually. It can't be perfect from Day 1 so take your time and enjoy your growth process.

And these are just a few. So now, let's talk about some other solutions that can help you tackle your cash flow problems!


Know your real costs

Costs can be categorized as either fixed costs or variable costs. Fixed costs are those that do not change with the level of production, for example rent. Variable costs are those that vary directly with the level of production, for instance raw materials. Knowing true costs is critical to business success and will help you better understand your break-even point and where you need to cut back to make a profit.


'Get personal'

Get personal. How much money do you need to live on? Are you taking more out of the business than it can afford? One easy way to check is to compare your business with others in your industry. You can use the ATO benchmarking tool, which compares businesses of similar size and industry. It can help you identify whether your costs are higher or lower than other businesses. If you're paying yourself too much, consider cutting back and investing those savings into marketing or a new product line. Also consider that your lifestyle may need to change as a start-up founder in order for your business to succeed.


Work with others

When you're running a business, it's important to keep tabs on your money. You should know where it's coming from and where it's going. The easiest way to do this, first things first, is by hiring a bookkeeper or accountant to help you out. This person can keep track of all your transactions and advise you when things look skewed.

You may think you can handle the accounting all on your own, but the truth is that others are often better at noticing patterns than we are; an outsider who isn't as close to the flow of money in and out will be helpful in spotting missteps before they become disasters.

Plus, doing this work yourself takes away from more productive tasks that only you can do (like running a meeting). By outsourcing some of these time-consuming jobs to a trusted partner, you'll be able to focus better and achieve more...Next up: be strong with decision making


Understand your cash flow

Cash flow is the money that flows in and out of your business. It's different from profit, which is the difference between what you spend and what you earn. Cash flow can be positive (there's more cash coming in than going out), or negative (more cash going out than coming in).

To stay on top of your cash flow, understand how much cash you need to run your business, how much cash is coming into your business and what will affect this amount. Having an understanding of these three things will help you forecast the state of your finances at any given time during the year.

This is important because it allows you to make adjustments before there are problems with paying bills. For example: if sales are down for a particular month, this may mean less money being collected from customers for products sold that month. If there isn't enough money coming into the business to cover expenses like rent or payroll, this could cause serious financial issues for your business. Understanding when sales are expected to go up and down can help avoid these issues by allowing you time to plan ahead accordingly.


Lean on your suppliers

Don't be afraid to ask for price breaks when you first start out. Most suppliers are willing to help new businesses get off the ground by offering discounts or payment options, and they understand that strong relationships lead to long-term growth for everyone involved.  Never be shy when it comes to money matters. All you need to do is ask! The worst response you can get is a No. BUT you can also get a Yes so why not ask anyway?


Have a plan B (... and C)

No matter how much you've planned ahead, there's always a chance that something might go wrong with your project. A natural disaster could come through, and knock out power to your business. Or maybe you arrive at work one morning to find that someone has broken into your store, stolen all of your cash registers and set the place on fire. Yes, these are extreme examples, but they actually happened to real businesses in the past year.

The point is: it's smart to plan for the unexpected. Make sure that everyone involved in your business has a backup plan for when things don't go according to plan – and make sure that if you haven't already done so, you have a backup plan for your personal finances as well. After all: if you're going down with the ship, make sure it goes down as comfortably as possible!


In summary:

Understanding your cost structure is vital to your success as a small business owner as it is essential in determining the price at which you sell your product or service. It can also help ensure that you earn a profit and don't inadvertently price yourself out of the market.

Understanding your cost structure is also important when making decisions about the future, such as whether to expand your business. For example, if you decide to open a second location, having information about how much rent costs will allow you to estimate potential rental costs for this second location. Knowing how many employees and what type of equipment is needed per location will help determine employee and equipment costs for the new location. By understanding all these factors, you will be able to make an informed decision regarding whether expansion is a good idea.

In addition, knowing your cost structure enables you to negotiate with suppliers more effectively. For example, if there are several suppliers that offer similar products or services at different prices and all other things are equal (e.g., quality), then cost becomes an important factor when choosing who to buy from. If one supplier's prices are consistently lower than another's but each has offered essentially the same quality products or services for years, it makes sense for you to choose the less expensive option over time because it keeps more money in your pocket so that it could be reinvested into growing or maintaining your business as opposed to being spent on expenses!


Above all, remember that mistakes are not failures! They are teachers, information, guide posts and opportunities. It is best to avoid cash flow problems but when mistakes do happen, don't beat yourself off over it. If your business does shut down, at least now you know what not to do in your next business venture. Dust yourself off, learn from your mistakes and trust me, you will do better next time. 

If you have hit roadblocks, you should get this free ebook. It highlights 3 specific and common mistakes that lead to business cash flow problems and what you specifically need to do to fix it!

You can download your free copy here.  


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HOW TO CREATE YOUR BUYER PERSONA

HOW TO CREATE YOUR BUYER PERSONA

4 Important Sources You Need To Create

Your Buyer Persona

 

Now that you know what a customer persona is, what you need to include, now let’s talk about how you can get the information you need.

 Fashion is very dynamic and consumers are definitely using more clothes for a less period of time, Why you may ask?

Simply because they have more options!!! And are more informed, so if they don’t feel a brand connects with them, they just find another! So you want to start your research from your customers.

You could consider;

  •  Surveys
  • Interviews
  • Digital Channel Analytics
  • Sales Data
  • Customer Reviews/ Feedbacks

Now let’s discuss 4 of these sources  

 

#1 Surveys

If for instance, you are trying to introduce a new service or modify your branding, policies, etc sending a survey to people in your database will help you know the opinion of your audience even before you embark on the project.

These could give you insights into how to go about the project when to launch the new concept or even place it on hold. 

Gap Inc. for instance introduced a new logo in 2010, only to receive some backlash from the consumers and within one week, the logo was pulled down.

Perhaps if Gap Inc. had conducted a survey, the money spent on re-branding could have been invested into something more profitable.

 

#2 Interviews:

Conduct an interview with people who will be willing to give you insights into the questions discussed in (this article). Such people may include; Your existing customers, old customers, as well as people you suspect might be your customer.

Doing this will be accurate and help you to truly know your audience.

 

#3 Digital Channel Analytics:

Virtually all digital channels have analytics in them, which can enable you to study what is happening on your website. Google Analytics, for instance, can show your the following details:

  • Demographics Overview
  • Age range to target
  • Gender with the most and least conversion
  • Age/ Gender and Interests
  • Device /network
  • Location
  • New / Regular users
  • Keywords and pages the user interacts with
  • Source of the user

In some cases, you can get real-time data such as the actions performed by the user while online. Eg scrolls, clicks, etc.

Hence, studying your analytics can help you know who you are targeting. Is it different from the audience in your sales data? Or perhaps your survey forms say otherwise. Then you can reposition your brand appropriately.

 

#4 Customer Reviews/ Feedback:

Here is another inexpensive way to get information from your audience. From your reviews, you can get the following information.

  • Who they are
  • Their interests
  • Expectations
  • Frustrations
  • The reason they have decided to be loyal to you.

On a final note, remember the purpose of this is to know who your ideal customers are, where to find them, and the appropriate content to provide for them at each stage of the Buyer’s journey. This, therefore, implies that you need to avoid making decisions based on guesses as much as possible.

Enjoyed reading this article? Check out more articles from our blog.

Join Our Business Webinars every Thursday, @ 8 pm WAT, live on Instagram where Professionals share fantastic tips and tricks to help your business grow.

 

Recommended Resources

 How To Increase Sales Online

How To Create Your Ideal Customer Avatar

Adopting Technology In Your Fashion Business

 

 

10 STRATEGIES TO BOOST SALES ONLINE

10 STRATEGIES TO BOOST SALES ONLINE

Online Marketing Strategies For Small Business

Have you watched episode 13 of Business Webinar by Martwayne? If you haven’t, then CLICK HERE. Today’s article is a continuation of the “HOW TO INCREASE SALES ONLINE”. Here I shared 10 strategies to boost online sales, especially as a small business owner.

But before we fully dive in, What is online marketing?

“It is simply the practice of leveraging web-based /digital channels to promote a brand’s products to its ideal target audience”

Such channels may include; social media platforms, emails, an optimized website, digital advertisement (Facebook ads, Twitter ads, google ads, e.t.c). Online marketing in the Fashion business, if done appropriately, can help brands position their products in front of their ideal target audience, at the right time and in the best way.

 

Therefore, working with a marketing strategy will ensure the effectiveness of the online marketing tools adopted by a brand.

So, let’s get to it.

 

 

Here are 10 online strategies  you can adopt in your

Fashion Business.

1. BUILD A BUYER PERSONA

Build a Bio persona to boost online sales

Without a clear picture of who your target market is, there is no way to accurately answer the WHO, WHAT, and HOW i.e Who needs your product, what problems do they have? And how you will solve it. Thus, you need to go beyond describing your target market as a working-class mum that loves to look classy. No that is not enough. You need to consider demographics, behavior, objectives, and goals.

This will help you write the appropriate sales copy that will make them convert to customers.

2. STYLE GUIDE

 

Creating a style guide in your social media platforms, blog posts and even emails is a good way to engage your audience. This will enable them to understand how to combine your clothes and also consider buying an extra depending on how creative your style guide is.

Tik-Tok videos, for instance, go viral easily on Instagram provided it is creative and engaging. A short fashion film is also another way to communicate with a fashion guide. 

3. SEO SALES COPY AND CONTENTS

 

If you haven’t been thinking about ranking on Google, then now is the best time to start doing that.  Check out this article on SEO ranking factors by Optinmaster . One of the best ways your target audience will know you exist is via google search. Hence the reason to ensure your website is fully optimized.

 

Build a Bio persona to boost online sales
You need to spend some quality time doing your keyword research, understanding what your customers are searching the web for and how you can appear during their search. You should consider incorporating your keywords in your about page, blog posts, landing pages, sales copy, ads, product description page, etc.

This will ensure consistency in the message your brand is communicating.

4. NEVER LOSE FOCUS OF YOUR BRAND’S VALUE PROPOSITION 

 

An average customer does not intend to stay beyond 15 seconds on an ad without a clear, concise, and complete message. So you want to ensure in your ads, you communicate your brand value proposition as clearly as possible.

Don’t just rub the features your products have on their faces, what will it do for them? How will it solve their problem? Adding a video with a clear brand message is another way to engage with your audience. A good understanding of your buyer’s journey will also guide you on what contents to create and how to pass your message across effectively.

retargeting helps to increase online sales

5. RETARGETING CUSTOMERS/ CAMPAIGNS

 

Another interesting strategy that can help increase your conversion rate is retargeting. It helps you reach the users that have interacted with your website but that does not take action right away. 

When a user interacts with your site and then leaves without converting, with the help of a code (pixels), your ads can be shown to the user when next he/she comes online. Make efforts to engage with your customers (IG highlights, Q & A session, poll, give away)

It is not enough to acquire customers, you also have to find a way to retain them. Thus, you need to keep them engaged and also looking forward to your content. Engaging in Q& A sections, polls, give -away, etc are suggestions on how to engage with your audience 

Moreso, your mail list comes in handy here, because you can send personalized emails, update them on a sales offer, a snippet of what is coming next, etc.

Okay before I share the next 5 strategies, which of the strategies  discussed above would you start with?

Share with us in the comment section and then CLICK HERE to continue reading…

Don’t forget to join our live webinars on Thursdays, 8 pm WAT. 

Also visit our YouTube Channel to get the full playlist of our business podcasts and webinars.

 

Recommended Article

 

Three Stages Of The Buyer’s Journey

How To Get Customers To Find You

3 Effective ways To Promote Your Business

 

TARGET AUDIENCE : When to Consider Changing Your Target Audience

TARGET AUDIENCE : When to Consider Changing Your Target Audience

In as much as choosing a target audience for your business is not always easy, there are times when you will need to re-evaluate your business. The truth is that nothing is really constant, not even your market. The fact that a certain demographic was earning a particular figure 5 years ago, does not mean the money will still have the same value neither does it mean their needs can’t change.

More so, with the advent of the Covid-19 pandemic, consumers are being challenged to evaluate their priorities which has ultimately led to new needs and spending criteria.

Some common reasons  why you may need to change your target audience are discussed below :⠀⠀

1. When the target audience is too small -if your target audience is too small, you won’t be profitable, it should be big enough to generate profit.

2. When the target audience is too big – When you’re trying to speak to everyone, you will end up reaching no one. Narrow it down to the relevant people but don’t make it too slim.

3. No buying power: Your customers need to have a buying power that can afford your products. If they don’t have enough money to buy your products, then they’re not the right target for your business.

4. Expansion: Sometimes with new innovations and market needs, you’ll discover other opportunities. Such opportunities might lead to an expansion and massive growth. Hence, the need to evaluate who your customers are.

For instance, some Fashion Brands and Garment production Houses have leveraged the covid-19 pandemic to increase the production and sales of nose masks and medical scrubs. Such opportunities come with expansion and a new marketing strategy. Consequently, the need to change their market.

With the evolution of the market as well as the business environment, changing your product consumers can be very useful.

Peradventure you made some wrong generalizations at the start of your business and you see a need to change your target audience, do not hesitate to do so.⠀If bigger companies have been able to do this successfully, so can you.⠀

Do you think it’s necessary for your business to change its target audience? ⠀

Let’s discuss….⠀

 

RECOMMENDED RESOURCES:

5 Mistakes to Avoid When Starting a Business

How to Spot Business Opportunities

3 Things You need to know

 

 

 

 

FASHION BUSINESS IDEA: Fashion Public Relations

FASHION BUSINESS IDEA: Fashion Public Relations

 Fashion Public Relations is an exciting, fast-paced fashion job. So you can either be in-house staff or a Public relations Agency.

However, it is suitable for those who have mastered the skills of promoting fashion brands. Fashion Marketing and Communication are key roles of a Fashion PR

Public Relations involves communicating the personality of a brand, new ideas and achievements. In return,  helps the consumer to see reasons why they should patronize a particular business brand or use a particular product. The bottom line, PR builds a form of uniqueness around the Fashion Brand they work with, portraying them as an authority in their field.

Having said that, what exactly do Fashion PRs do?

They basically need to create a hype about the brands they work with so they build relationships and work with certain categories of people, such as:Fashion Public Relations involves working with Media houses, Fashion Editors and Fashion Influencers.

– Editors and Media Houses

-Fashion Event Organizers

-Celebrities and Influencers

-Fashion Stylists

Dealing with the promotion of brands through earned media channels such as broadcast, print, and online media outlets is also a key role of a Fashion PR.

As a Fashion PR, what skills do you need?

Generally, Fashion public relations roles have an alluring appeal and are very people-focused but it is not for the faint-hearted. It is a very hands-on job that will require a lot of extra time especially during Fashion Week and the new product launch.

More so, you need to be proactive, innovative, creative and multitask.

You have to leverage the relationships you build with people, hence a good interpersonal and communication skill is essential. Fashion PR also work with Fashion Stylists on Fashion shoots and other Fashion events.

Fashion PR targets editors, producers, reporters, and writers at influential mass media outlets. In recent times,  an increasing amount of fashion PR work focuses on Fashion influencers. Fabulous Ideas to Market Your Clothing Brand Online suggests collaborating with influencers because they already have a large audience so you can leverage on that.

Anyone who wants to run a successful Fashion Business should not underrate or dis-regard the relevance of any form of marketing. The article,  5 Rookie Mistakes to avoid when starting a Fashion Business further emphasizes the essence of marketing and brand awareness

Fashion PRs acts as the representatives of a brand. Thereby creating a strong brand identity for your business. With their understanding of media trends and relationships with media outlets, celebrities, and influencers, sponsors, collaborators, afflation and Fashion Influencers, they can put out the right content for the right person at the right time.

Do you think you qualify for this role? Drop your thoughts in the comment session. You can also check our Online Fashion Courses on how to build and grow a successful Fashion Business.

 

 

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