It can be a wild ride on the entrepreneurial roller coaster. According to a study carried out by Bruce D. Phillips and Bruce A. Kirchoff, only 50% of all companies polled survived their first five years.
Even while taking advantage of business opportunities, business owners often fail to cope with today’s new challenges, such as digital transformation, lack of flexibility and financial resources, wrong business location, etc. As a result, they end up finding themselves confused and at a loss.
These are the key reasons why many new businesses go belly up.
Data loss and the inability to properly distribute financial resources
Many business owners (especially those who are just starting out) don’t properly understand cash flows and often fail to estimate how much money they need to not only start – but also to maintain their business.
Moreover, new businesses usually don’t consider unforeseen expenses.
For example, natural disaster can cause a business to lose large amounts of critical data, and thus money. According to the U.S. National Archives & Records Administration, 60% of companies that lose their data are out of business within six months of the causing disaster. In fact, after a natural disaster (such as a flood or hurricane), 40% of small businesses close immediately, 25% will be closed one year after the disaster and in three years that number can jump up to as high as 75%.
The average enterprise wastes $2.5m-$3.5m per year just on searching for information and re-creating lost documents.
That’s why businesses are better off scanning and electronically saving all of their paper documents. This way, they save thousands of critical documents from being lost, stolen, or damaged.
Keeping up with the times
Another reason businesses fail is often connected with the inability to keep up with new changes and trends – such as digitalization.
Putting your company through a digital transformation isn’t always as simple as 1-2-3 – but it’s definitely worth it.
Considering the money issue – digital tools are a great way to lower your business expenses.
For example, the average company spends over $8,000 on filing cabinets. In comparison, digital document management systems cost less than one-fifth of their physical paper counterparts.
Poor management and slow hiring
Lack of proper management skills and expertise can cause a lot of problems in business areas such as finance, production, hiring and management of employees.
To solve this problem, business owners should identify and work on improving the skills they lack, hire experienced employees, or look into outsourcing.
For example, delivering fast and effective talent acquisition will have a positive impact on revenue.
For a firm like Amazon, if their hiring department was to take 10 days more than usual to acquire human capital, on-the-job performance would drop by 10%. A 10% drop in its average revenue per employee of $750,000 would mean a loss of $75,000 for every new hire.
And let’s be fair, your average revenue per employee is likely not the same as Amazon’s. But this also means that you won’t be able to bounce back as quickly from your monetary loss.
Recruiters can simplify the hiring process and get all required documents signed and completed as quickly as possible with SignNow. This service makes it easy for new hires to complete, e-sign, and return their forms from anywhere and on any internet-connected device.
If your business requires walk-in traffic or frequent meetings with clients, a good business location is essential.
A poorly located office can make even the most skillfully-managed company fail.
Factors to consider when choosing a location:
- What time your customers are expected to do business with you;
- Traffic, parking, and lightning;
- Equipment, storage or warehouse facilities;
- Location of your competitors;
- Exterior and interior of the building.
If your business doesn’t require you to meet clients, your home could be a perfect location when opening your business for the first time.
Lack of flexibility and mobility
However, a wrong location may not be so critical – if your business can boast of being highly mobile that is.
With digital tools, you can manage over half of your necessary tasks remotely. Working digitally allows you to send, sign and obtain your necessary documents without any need to meet in person or send expensive mail parcels.
When it comes to mobility, SignNow has no rivals. With its kiosk mode, customers can sign documents directly on the screen of a tablet or smartphone instead of dealing with a clutter of paper documents. It allows you to immediately change any point of a contract while negotiating on site.
We want to help you overcome the first hurdles and grow your business. With SignNow, you can manage digital documents as well as e-sign your tax forms, contracts, and much more in just a few clicks. Take advantage of automated business workflows today and save your business time and money.