Arlington Capital Management even the most experienced and also zealous entrepreneurs could encounter failures in starting up a business if they are unable to stay at the top of their game consistently. Entrepreneurship is especially challenging if you consider the fact that only 10% of the new business venture manages to go beyond the second year of existence. The reasons why new ventures find it so hard to stay afloat are many, and also this article focuses on some of the main reasons that entrepreneurs must stay alert about to ensure the longevity of their new venture.
Funding problems are the most common cause that stifles new ventures. Startups need a lot of funding at various stages of the lifecycle, and entrepreneurs must have the solid backing of financial resources to maintain a steady flow of funds to keep the business going. Often, the projections made by entrepreneurs with respect to cash flow and revenue earning go haywire, and also investors lose confidence and prefer to stay out from the venture that dries up the funds and also results in the natural death of the business.
Cash crunch and liquidity problems
Poor cash flow management is a big reason for business failures. Often, entrepreneurs are unable to forecast correctly the kind of balance that could maintain between accounts payable and accounts receivables. It is a trend among new ventures to create budget provisions with an eye on future revenue earning, which needs some time to take shape, and meanwhile, businesses experience cash crunch due to lack of money flowing into the system. Liquidity problems are also the reasons for venture capitalists withdrawing from making investments.
Having adequate staffing is important for businesses to run smoothly, but if entrepreneurs fail to provide the right staffing solutions, the business processes suffer and adversely affect performance, thereby leading to a crisis that can pull down the business. On the other hand, over-staffing is also a problem because too many people can result in inflated expenses and affect productivity due to the under-utilization of the resources, which creates a big hole in the finances and causes the downfall of the business. It is important to ensure that the right number of people with the right attitude for work is always available.
Mismanagement and operational deficiencies
Soon after the business takes off from the ground, it is important to sustain the momentum by professionally managing the operations to deliver the right results. When entrepreneurs are unable to manage the show well, it affects the business performance, and if the trend continues, it is only a matter of time before the venture nose dives. Staying involved and understanding the ground realities should help to build a strong organization that delivers results.
Peaking at the wrong time
Arlington Capital Management For a business to strike gold, it is important that ideation, incubation, and execution combine in the right way at the right time with respect to the market demand. Any mismatch in timing, either peaking too early or late, could prove detrimental and drive the business towards failure.
There are many other reasons for business ventures failing to survive, but the above are the most important ones.