Business is established to make a profit. As they vary in product or services they render, they all need to make sales and bring in revenue to survive.

What happens when they don’t make a profit?

Owners of most businesses get frustrated once they aren’t making any sales, this reminds me of a family friend who tried growing a business but after some time it crashed. He thought it was the ‘village people’ as they do say but it wasn’t. He later discovered the problem.

You might ask what the problem was. Well, it was a lack of knowledge, he thought he knew a lot about the business of which he didn’t.

Before you start any business the first thing you need to do is to make proper research about the business, know what location fits the business, know what your customer wants from you and also adapt to change.

As we know lack of probability is the primary reason why businesses go bankrupt, other reasons could make a business go bankrupt.

Here are other reasons why businesses go bankrupt.

  1. No strategy; In every business, you need to know where you’re going and what steps you need to take. For instance, if I do this then I can do that, and then the business can expand into this. All this is a chain process people call STRATEGY and without it, every business is doomed to fail. Your strategy is what allows you to deal with the market, how you behave in times of prosperity and in times of crisis. Strategy is the foundation of all your decision and it allows you to keep track of your business progress.
  2. A poor understanding of market needs; one of the reasons some businesses go bankrupt is that they ignore the customer. This might sound somehow but it’s the truth. Listening to your customers is an invaluable practice that allows a business to learn, grow and adapt. Customers are always giving feedback and suggesting what they need to satisfy their needs. You must keep your customers in mind and focus on their problems.
  3. The inability to sell; cash flow is the oxygen of every business as long as you have money coming. The Statistics state that poor cash flow accounts for 82% of business bankruptcy. Owners of most businesses think if they build a brand people would come rushing to get it but get disappointed once no one is interested in what they have to offer even if it can solve their problem. Why? It’s because they don’t know how to sell. Selling is the art of telling compelling stories that explain the benefits your product or service will have in the life of the consumer. So, the better you are at telling stories the more oxygen you can feed into your business.
  4. Poor financial management; This has led a lot of businesses to bankruptcy. If you don’t know how to manage whatever amount of money you have it would be difficult to give an account. Businesses that do not have a record of how money comes in and out of the company would go into bankruptcy.
  5. Poor investment; an investment without proper knowledge or experience can lead to bankruptcy. Owneres of some businesses jumps into different investment plans without having an in-depth knowledge of what it entails. The best way to avoid this is to learn as much as possible before investing i.e. make a thorough research. Get help from experts and invest in a more stable market if unsure.

Bankruptcy can also result from a lot of other problems such as poor business locations, criminal activity like theft and fraud, personal issues like divorce, and disasters like storms, floods, and fires.  To avoid bankruptcy you need to make proper research of your business. Know the risk involved in the business, understand your market, be open to reinventing your business, hire the right employees and ask for help from experts when needed.

I wish you a productive day.

Feel free to share your ideas with us in the comment section.