A handful of specific errors may cost your business. While ‘to err is human’ is natural, it can be disastrous in a commercial landscape when not fixed on time. An analysis of data from the US Bureau of Labor Statistics shows that about 20% (18.4% to be precise) of new businesses fail during the first two years. Establishments that are less than 1 year old tend to rise and fall with the business cycle of the overall economy. After 5 years, 49.7% have faltered and 65.5% of businesses failed after the next 10 years.
These may happen due to multiple reasons based on the particular state or industry. But the key to success is the resilience to fail before hitting the jackpot. For instance, studies revealed that 99% of companies with a trusted backup plan could survive ransomware attacks. The US has few of the brightest business minds which, along with structural economic soundness and better education, can come out stronger post-failure. Below are a few mistakes to know about beforehand to ease the damage impact and get back on track.
1. Non-Adherence to Business Laws
Pay-to-play occurs when firms or employees make campaign contributions to political candidates to receive favors and benefits. It may lead to cancelled contracts and disqualified bids or even getting banned from the business. First-degree crimes carry a sentence of 10 to 20 years in the state prison and a criminal fine of up to $200,000. Other laws entrepreneurs must be aware of are Business Licenses, Finance, Bookkeeping and Tax. Go through legal factors and regulatory compliances for ethical business functioning.
2. Outdated Methods
The US economy faces a boom-and-bust cycle yet the overall trend is upward. So, every business must strive to be on top of the latest trends. Technology and equipment are being updated continuously. For instance, a few emerging trends are network marketing, E-commerce, M-commerce, franchising and aggregator.
Trends and business cycles are two basic concepts that managers must understand to be able to communicate effectively with partners. If you are able to see a 10% increase in profits every year for 5 years, the business has an upward trend in profit which means a general direction in a variable is moving over time.
3. Taxes Incompliance
Fine, penalties and a period in prison are serious repercussions of tax breaches. Two of the most common mistakes are late tax return filing and delaying payment. A willful failure to pay end up in a ‘tax evasion’ or ‘tax fraud’ which needs $10,000 or five years in prison or both. This is when you are:
- hiding income in an offshore account
- keeping two different books
- claiming wrong deductions and
- lying to the IRS agent during an audit.
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Work with a team of tax experts to help you fulfill the liabilities by creating payment plans to streamline business accounts. This will prevent misunderstandings in future.
4. Super-Fast Expansion
Know the markets and areas you wish to expand in. It depends on the type of business and industry as well as the developmental stage of the enterprise. Growing super quick risks your business turning unsustainable while putting pressure on resources. There may be cash flow errors, overvaluing sales and hiring incompetent people too.
The management and financial structure might also experience a setback. Most ‘fast-growing’ companies have failed due to doing too many things at the same time. Consider not more than 15% -25% growth annually which is healthy and safe. Keep the focus on the big picture rather than micromanaging to be able to ensure a worry-free operation.
5. No Market Investigation
This is especially dangerous for a new brand since you may not be able to penetrate it when it is already saturated. A few businesses you would not want to start are a pet supply store, web designing, a travel agency or a limousine service. These are no longer generating ‘fresh’ demands and have little growth opportunities. Identifying the competitive advantage and discovering new tactics to survive are not easy. Find an unmet customer need and try to push your products. This is a safe and simple way to satisfy user pain points.
Try to operate ethically to keep your brand from sinking. Further, avoid these mistakes so that it does not cost your customer and revenue in the long run.