5 Reasons Why New Shops Fail

Posted by CNC Reporter on Dec 19th, 2007.

Opening a business and keeping it open has never been an easy task. There are many different ways a new business can fail. Although the statistics for opening and keep a new business open are getting better, each year new shops open and close, mainly because of a few key errors on the part of the shop owner. In this article, we’ll explore five things to keep in mind when considering a new business venture.

Management Can Make or Break You
Many times, new business owners aren’t able to see their own flaws. Regardless of the reason they chose to open up their shop, some haven’t considered what running an effective shop entails. Being a good manager of your shop is of paramount importance. Without good management skills, the shop is bound to suffer, which is not what anyone has in mind when they open up a business.

Good managers balance budgeting, payroll, accounting, financing, and many other aspects of the business with careful attention to detail. An effective manager also knows what kind of employees to hire, how to properly train said employees, and how to maximize productivity while maintaining a positive work environment. Having all things working properly is the key to a successful business.

Lack of Financial Foresight
Many times new businesses fail because of a lack of financial foresight. In other words, the business owner panned out exactly what would be needed to get started, but not what would be needed to stay in business. It is important to realize that opening and running a shop requires time and money. Until the customer base has grown sufficiently, it is not realistic to think that a new business will be able to stay open without some capital on reserve.

Poor Planning
This particular point is related to all of the others on the list. Plans must be made and adjusted in all areas of a fledgling shop. From finances and budget, to employees and productivity, a good business must be planned with an eye on the future. Most banks require a business plan for start-up capital; to secure additional capital, an updated business plan will more than likely be required.

Rapid Growth
Sometimes new businesses come on to the marketplace and immediately begin to do very well. This is excellent because it helps the new business get ahead. The important thing to remember is to stick to the business plan. Many owners of new shops grow too quickly because business is good from the get go. Realizing that there will be hot and cold trends with your shop is important, because if not you will expand too quickly, stretching much needed capital and resources to the breaking point. Expanding should be a long term goal, not an immediate one.

Website Woes
In this day and age, it is critical that your shop has a well-maintained and regularly updated website. The advantages to having a welcoming and easily navigable website are too many to mention, but there are several main things a website does for you. First, you get not only people seeking you out, but you can seek them out as well, utilizing software that advertises your shop when certain keywords are input into a search engine. Links to email and other information are there for the potential customers’ perusal. If your business has no web site, chances are that you have missed out on many opportunities to earn and keep new business.

Opening a new business is difficult enough. Make sure that you pay attention to these five common mistakes and overcome the odds that are stacked against you and your business. They are easy enough to get past once you know what you are looking for.



2 Responses for “5 Reasons Why New Shops Fail”

  1. Zhana says:

    This article makes excellent points. It would also help to have specific examples of businesses that have failed on these points – as well as some that have succeeded.

  2. Editor says:

    Feel free to post your own business successes and failures. We’d love to hear your stories.

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