There are numerous possible reasons why a business can fail, and it’s possible to encounter multiple of them at once. Your business could become vulnerable with any of these and even have to shut down.

In relation to the above, it is estimated that 45% of entrepreneurs have had (at least) a company that failed, which shows recurring problems, and the need to learn from them so that your project can be maintained over time. That is why in this article you will see why companies fail and how to avoid it.


7 reasons why a company fails

Knowing the potential reasons for your venture’s failure may help you avoid them or, if you are already confronting them, find a quick solution.


1. Non-existent or deficient planning

Having a business involves researching, planning and analyzing. You must define what your company proposes, its offer over the competition, and know the channels to reach your target audience well.


2. Not knowing your client

If you don’t know your target audience, you won’t know how to sell your product to them, therefore, you must be attentive to their consumption patterns, the channels they consult and their needs.


3. Poor inventory management

Studying your company’s sales trends is crucial since it can fail if it doesn’t have the essential stock or if it has excess, which can negatively impact cash flow.


4. Unstable growth

The expansion of a company must be at a constant rate, but not necessarily so fast, since rapid and excessive growth implies more expenses than profits, and often underestimating the risk profile.


5. Low sales

Sales are very important to generate the necessary resources to maintain the operation of a company. In this regard, it will always be recommended that you offer quality products and services, as well as a good experience to your customers, so that they are maintained over time.


6. Try to cover many markets

Wanting to sell to everyone is a bad strategy, since your company will not only not have a value proposition, but it will not be able to attract many customers. It is best to focus and specialize in a single market, according to your competitive advantages.


7. Poor financial management

Not having a financial plan, an accounting system, mismanaging capital and mixing personal finances with business finances is something that can quickly affect the finances of a venture. Have a lot of clarity in the finances of the business and take care of both income and expenses.


How to avoid it?

Now that you know why companies fail, it’s time for you to know how you can avoid falling into those mentioned scenarios. Some recommendations that you can consider are:

  • Do not change the vision of your company in moments of crisis or in the face of any situation that affects it.
  • Be aware of possible market risks, knowing the strengths and weaknesses of your business.
  • Have contingency strategies to deal with risks that may arise.
  • Invest in digital marketing so that more people see you and so that you can position your brand.
  • Define short-term and long-term goals in a business plan, so you know where the company is heading and what elements it has to achieve it.
  • Do not go out of your budget, spend only what is necessary and reinvest the benefits until you reach profitability.
  • Evaluate performance and results on a regular basis, so you know if you’re doing well or if you need to make adjustments.
  • Ask for financing when you have the capacity to handle it, so that you can expand your venture.


MCA as part of the solution

Financing, already with solid planning and a little time in the market, is the best option to achieve short-term goals, in a stable way.

And to make it even easier, there is the MCA or cash advance, a type of online loan with an easy application and a quick resolution, which is paid with a percentage of the sales of the company, plus a small fee upfront. .

If you want to boost the operations of your company, opt for a financing that does not drown you in debt and makes your project grow, like the MCA of Pymes Capital, just go to the website, fill out the form and wait for the answer. That way you can have capital tailored to your needs.