Three Operational Reasons for Decline in Your Business

Most businesses that start up fail. This is a well documented fact, even if it’s not one that business owners like to think about. However, one thing that surprises many business owners is the reasons that businesses fail. Certainly some of the time it’s the classic reasons like not enough customers, or a poor product.

However, other times it can be combination of problems that don’t seem like much, but in the long term end up in the failure of a business. In this article we’re going to look at some of the “unconventional” reasons that businesses fail, and how to avoid these problems.

Three Reasons for Decline in Your Business

  • Employee turnover. There are a whole host of problems associated with employee turnover. One of the most obvious problems with constantly bringing in new employees is the cost of training them. Every time someone quits you’re going to need to find a replacement for them. Once you do, depending on your business, it may take a few days, weeks, or even months to train them to do their jobs correctly. During that time they’ll probably be earning you little to no money, but at the same time you have to pay them a normal salary. If this happens frequently enough, it can be a major drain on your budget.

    Another problem associated with employee turnover is that many business owners don’t consider the effect that it has on employee morale. If employees are quitting on a regular basis, it can be devastating to the moral of the company. If a person’s best friend at the company quits, and then their second best friend quits as well, they’re far more likely to quit then if those two people had stayed. It’s a downward spiral” the more people quit, the more likely it is that others will follow in their footsteps.
  • Excessive spending on marketing. Many business owners feel that the more they spend on marketing, the more products they’re going to sell. While in some cases this may actually be the truth, in plenty of cases it can lead to a drained budget and a backlog of products still left on the shelf.Instead of throwing as much money at a marketing campaign as you can, you should create a plan first. Take into account your ideal customer, what the best way to reach them is, and whether it’s worth spending money on them because they may be a repeat customer in the future.

    For example, a company selling grass seed may want to spend more to acquire a customer because if they’re happy with the product, they may buy the seed for their lawns every year for the next twenty years. However, if you make guitars, you might want to spend less on marketing, because unless you’re targeting professional musicians, most people are not going to buy a dozen guitars in their lifetime.

    Of course these are just examples, but they’re things you should take into account when planning your marketing budget. Think about your ideal customer and how much you would be willing to pay to market to him if you knew that he would buy your product again. If you find out that this number is half of what you’re actually spending at the moment, then you may have a problem with your marketing budget.

    A final note on marketing is that in many cases, internet marketing is far more effective than traditional marketing. That’s because you can target your ideal customer without having to pay thousands of dollars to get your advertisements in front of the eyes of people who will never buy your product or service. PPC (Pay Per Click) advertising is an especially effective way to reach the audience you want, without spending a lot of money on advertising.
  • Poor leadership. When hiring a manager, you may be tempted to hire the most qualified applicant to submit a resume. However, in some cases this may not be the best choice. You should take into account the employees in your business before picking a manager. If you run an engineering firm and you employee a host of extremely rational, emotionally level engineers, then you’ll probably want to hire a smart, level headed manager who has a firm grasp of engineering problems and solutions and can help the less experienced members of your team.

    On the other hand, if you run a startup or more creative business, you may find out that people don’t need technical support but instead, someone to lead them through tough situations and to deal with clients or other coworkers in an appropriate fashion. If that’s the case, you may want to consider hiring a highly charismatic leader. He might not have the technical expertise, but his people skills and ability to bring the group together will make up for that in the long run. Neither type of leadership is right or wrong, but you should consider what kind of leader your business requires before hiring someone.

 

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How to Avoid These Mistakes

While these are just three examples of how internal mistakes can cause a business to fail, there are many more out there. One of the best way to avoid these mistakes is to learn from people who have already made them. There are a wealth of books and magazines out there that address these specific issues, and many others like them as well. By reading about the mistakes that other business owners have made, you can avoid making the same mistakes yourself.
Another way that business owners stay successful is by dealing with problems as soon as they pop up. For example, if a business owner notices that one or two employees quit at the same time, he asks why and tries to figure out the reason. By doing so, he’s addressing the issue at the source and taking care of the problems in his business before they become too big to handle. If you notice employees quitting, your marketing budget draining your account, or a lack of employee morale, don’t stand back and assume it will sort itself out, take control and figure out the problem! If more business owners took this approach, we would see fewer businesses fail and more businesses flourish.