How to Quickly Increase the Chance of Your Business Survival In Its Early Stages?
Do you want to know the reasons why most small to medium-sized businesses fail?
New study reveals why Australian small to medium-sized enterprises (SMEs) fail.
Do you want to know the no. 1 reason so you can avoid the pitfalls and not become part of the statistics?
The statistics outlined below from various sources will assist you in becoming more prepared in avoiding the pitfalls so you could increase the chance of your business survival quickly.
Australian Centre for Business Growth Research Study Findings
The Australian Centre for Business Growth revealed new research which identifies the reasons Australian SMEs are failing.
According to SME CEOs, the top 5 reasons of business failures are as follows:
1. Lack of leadership and management skills such as poor planning.
25% of CEOs said it was due to lack of leadership, poor management and/or no planning.
2. Inadequate market research and lack of sales skills.
17% of CEOs said it was because they did not know how or they did not do enough market research, marketing or sales.
3. Mismanagement of financials.
14% of CEOs said it was because they did not understand finance, they relied on someone else to assess the company's financial health, they did not have the necessary financial skills to manage the company and they did not know how to fund the company's growth.
4. Underestimating the impact of external factors.
13% of CEOs said it was because they did not anticipate the impact of external factors. They were unprepared to deal with unexpected issues such as fire, drought, interest rate changes, regulations, or global trends and they had no risk mitigation plan.
5. Poor governance structures.
11% of CEOs said it was due to poor governance structures, there were problems with partners or family members that led to failure.
These statistics came from the data collected by the Australian Centre for Business Growth at the University of South Australia's Business School for the period from 2014 to 2018.
Australian Institute of Company Directors Statistics
According to Australian Institute of Company Directors only a minority of new businesses survive the five-year mark. Based on the article published by AICD in 2017, small business in Australia had an average lifespan of 3 years and the exit rate of failed businesses was 12% which was approximately 261,000 businesses.
Reserve Bank of Australia Statistics
Based on the article published by Reserve Bank of Australia in 2015, less than half of the micro businesses that were established in 2009 to 2010 were still operating by 2013.
According to RBA, managerial issues was the main cause of small business failure. This was due to small business owners not having a business plan or they did not use a well-developed business plan. The RBA research found that business owners only wrote business plans when they needed a loan.
According to the article published by Indeed, around half of all new one-person businesses fail in their first three years based on the data from Australian Bureau of Statistics.
Although there is a relationship between the business size and the probability of the company's survival, new businesses face some challenges regardless of how big they are.
Australian Small Business and Family Enterprise Ombudsman Survival and Success ips
According to Australian Small Business and Family Enterprise Ombudsman, advisers can help.
Businesses should consider professional advice as a business investment rather than a cost. It is this mindset that can help your business succeed.
It is recommended that you use a good accountant with strategic experience instead of only seeing an accountant a few times a year such as during tax time to receive some advice.
Here are some business survival tips based on the article published by Australian Small Business and Family Enterprise Ombudsman:
- Comply with government regulations.
- Think creatively on how you could potentially create multiple sources of income.
- Prepare a cash flow statement to assess your operational funding requirements.
- Seek professional advice
- Talk to your suppliers to request an extended payment term
- Talk to your employees to help you generate some ideas on how you could improve and grow your business.
Succeeding as a small business owner is challenging. However, the good news is that there are methodologies that you can implement to avoid the pitfalls that could assist you in growing the business and help to increase your chance of success.
To summarise, if you want to increase the survival rate of your business it is important to avoid the pitfalls of growing a business. It is important to ensure that you comply with government regulations. Think creatively on how you could potentially create multiple sources of income. Prepare a cash flow statement to assess your operational funding requirements. Seek professional advice. Talk to suppliers to get payment term extension. Speak to staff to help you generate some ideas on how you could improve and grow the business.
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