The #1 reason businesses fail

“Why did they go out of business?”

That is an interesting question that is asked very regularly. Although businesses fail (or struggle) for many reasons, there is one huge one, and it is not what you think. Common answers include customer service, management, location, price, or quality. The most frequent answer is money – which is still not correct.

The real reason is an understanding of where money comes from.

Statistics from organizations like the SBA (Small Business Administration) always show money as the top reason businesses fail. However, that only tells a tiny part of the story. It is not money (or lack of money) that causes a business to fail. It is a true, complete, and thorough understanding of where money comes from and why it does or doesn’t come.

To understand this, we must dig into a dirty word many people like to hide from. That word is “sales.”

Whether we like it or not – money comes from sales. Most people work excruciatingly hard to avoid selling, the thought of selling, or anything that has to do with it. Unfortunately, this sets them up for failure or at least unnecessary struggle. 

Every single interaction we have with another person is being evaluated by them. Whether we are hoping to sell them (or not), they are determining whether they will buy from us (or not). They are sizing us up – our location, store, office, tonality, body language, etc. In each interaction, they are subconsciously deciding whether we could be a good fit for them (or not). 

Why bring this up? Because it is focused on so little. Even to the point where others blatantly avoid it.

Every week, business owners contact us to see how we may help them. Recently several of them shared they have been offered the opportunity to join a boot camp for business success, promising to deal with the top things they need to focus on to build a successful business. Topics include HR (human resources), marketing, time management, and inventory control.

The surprising thing is that of all the topics promised, sales was not listed. 

There is no doubt that HR, marketing, etc., are important. However, none of those other things matter without enough sales coming in.

A good marketing plan does nothing for you if you don’t know how to sell when someone calls or comes in. A good HR plan will never make up for the lack of sales going through the cash register.

If this were an isolated incident, it would not be an issue. Unfortunately, it happens far too often. We constantly work with business owners who are frustrated because of some consultant, coach, or other business group who has provided guidance that wasted time, energy, money, or all of those!

To be better in business, you must have a full, accurate, complete, and thorough understanding of where your money comes from and why it does or doesn’t come. It doesn’t matter how good or bad many aspects of a business are. Without enough sales, they will struggle and eventually fail. 

So, let me ask – are you fully aware of where your money comes from? Why every single person or organization chooses to (or not to) do business with you?

If you don’t know or don’t like your answers, you should find a Business Growth Consultant who can support you in Elevating Your Performance.