Introduction
Small businesses especially retail shops are closing up at a high rate in the recent past regardless of the goods or services they are offering. A combination of reasons put these small businesses at a higher risk of closing than large-scale retail outlets. The following are some of the reasons and factors that influence the closure of small businesses.
Main text
Poor financing; most small businesses fail due to lack of proper financing. This does not necessarily mean lack of funds but the lack of proper planning to support growth opportunities. In all types of business, planning needs to be done in advance instead of rushing to look for finances when you urgently need it.
Competition; small businesses face stiff competition from large-scale international retail outlets which are spreading fast in all neighborhoods. These retail outlets are offering a big range of products from a packet of juice to cars. Ignoring the competition and threat posed by these retail outlets leads to business failure
Lack of industry experience; all businesses have different environments where they can thrive. Small business owners should make sure that their business meets the needs of the people. Lack of experience in the industry can lead to poor organization of the business and its resources.
Lack of adequate cash flow; proper cash flow is very important to a business. This is because it enables a business to maintain sufficient funding to meet its daily activities. Many businesses fail because the owners do not know exactly when they will get money and how much they will spend. It is therefore important for small business owners to have firsthand information on cash flows to enable them to know how much money they can spend on a monthly basis or any stipulated period.
Poor business planning; it is important to have a good business plan that will help identify the goals, cost structure, external influences, strengths and weaknesses of the business.
Incompetence management; Good management is necessary because it helps in effective implementation and monitoring of the strategic and operational plans of a business. Lack of experience in a particular field can spell death to a business.
Impracticable goals; there is a difference between setting a goal and setting a workable goal. It is very important to set realistic goals which can be met and are within the bounds of accepting to taking risks.
Reduction of customer base; many customers who form the client base for a business may move to other places leading to reduced client base. Diversifying the customer base is an important factor in building and maintaining a small business.
Uncontrolled growth; Lack of growth control in small businesses can also lead to business failure; Proper planning must be in place in order for a business to grow.
Inappropriate business locations, the setting and the location of a business may also lead to its failure especially if it’s located in a place where human traffic flow is low. It is very important to find the appropriate location to establish a business since it can not thrive in a poor location. An entrepreneur should have social awareness of the environment and ready to take risks
Lack of Entrepreneurial Skills; lack of entrepreneurial skills by the business owner can lead to business to fail. They should also have good knowledge of how to handle customers and provide essential goods.
Summary
All these factors, when not taken good care of will definitely lead to the closure of small businesses especially small shops found in residential areas, along the highway and suburbs.