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5 Reasons Which Makes Small Scale Businesses Fail to Make Profits and Some Business Tips Which Can Boost Your Business

Small Scale Businesses

Small Scale Businesses

5 Reasons Which Makes Small Scale Businesses Fail To Make Profits And Some Business Tips Which Can Boost Your Business

Nowadays a lot of people are doing different small scale businesses with a full hope of making more profits, which could improve their lives. Much as this is the case, surprisingly not every one who is in business, is able to make reasonable profits. There are a lot of reasons which a lot of people doing small scale businesses do not know which makes their businesses not to perform better than it would if certain knowledge were known to them prior to the start of their businesses or during their businesses.

This article will will uncover 5 reasons which make small scale businesses to fail to make enough profits despite their efforts to be a leading player in the business they are doing.

The following are some of the reasons which make the majority of people doing small scale businesses fail to make their business opportunity meaningful; lack of entrepreneurial skills, lack of market research, lack of the feasibility study, among others.


Reasons Which Makes Small Scale Businesses Fail To Make Profits

1. Lack of entrepreneurial skills

The majority of persons who are doing small scale businesses go for common businesses and the majority of them start doing businesses because their friends are doing. As a business entrepreneur with a passion of being successful, you have to be offering innovative solutions to the problems majority of people are facing. An example here, is when someone opens up a shop, with a full confidence that he will perform much better than his/her leading competitors yet he/she will be selling the same products which his/her competitors are selling at the same price with a similar post service. In this case, it will not be very easily to perform much better than your friends since both of you have the same or similar market skills.

As a business entrepreneur, you need to be focusing on new ways of doing businesses, which will make your business unique in offering solutions to your customers. Some excelling entrepreneurs have inventive and innovative skills which enable them to bring something completely new on the market, which gives them competitive advantages.

You might be wondering as to how as a small scale business owner you can be innovative in your business field and start making more profits than ever before. The first thing you should consider doing is by performing a few market research, which help you to find out what problems your customers are facing and how they want your services or products be improved. Having performed this market research, then your duty is to go back and try to improve your services or your product as to what your customers would be expecting.


2. Lack of business plan

Business plan is a written document which acts as a road map for your businesses as it gives you detailed activities for your business and how the business will be performing, your projected profits or losses and detailed sales focus.

The majority of small scale businesses owners start a business even before knowing how a business plan look like or having information on how the business plan would help them to reduce some business risks. This makes them to be doing their businesses anyhow without knowing how their businesses' needs will be done, what they need to follow and what they should not do.

As we have pointed out, a business plan acts as a road map to your business as it contains detailed steps on how your business will achieve a projected profit. It has a part which shows a description of your business, your capital, where the business will be running, legal ownership of the business, projected profits, sources of funding for your business, SWOT analysis part, which shows your business strength, weaknesses, opportunities and threat, which help you know how you can deal with your business competitors, which will help you reduce certain market risks.

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The business plan also helps to guide you on projected cash flows which shows you the amount of cash which will be coming in into your business, which would include your sales, loans, grants and collection of credit sales. On the other hand, it also shows you the cash which will be going out of your business, which will include your business spendings, loan repayment and all business expenses.

You might be wondering as how will the knowledge of cash flow help you excel in your business. The key point here is that, a cash flow will guide you with what you should do, what you should not and what you should expect. An example here, would be taking a loan into your business which will result in negative cash flows because of the higher interest rate, this will just help to tell you that the loan which you want to borrow, will not be viable in your business. Similarly, without undertaking any loan, any negative cash flows will alert you that certain month or year, will be difficult to balance up your business.


3. Lack of market research

The majority of small scale business owners start their businesses without doing market research. Market research involves preparing a questionnaire with a few questions which aims at finding out the challenges your customers are facing and how they want your services be improved.

A collection of such useful information, will help you able understand your customers than your competitors would and this will help you solve their problems than your competitors would and this will help you improve your business performance and will help you create strong relationships with your customers since they will be satisfied customers.

In business, it is known that a satisfied customer, tells 3 people about the goodness of your business or product, however, unsatisfied customer tells at least 10 people on the negative things about your business, this makes your business to be under threat of losing your potential customers. Therefore, performing a little market research will help you decreasing risk of losing potential customers.

Some medium scale businesses fail to make a few profits because of lack of feasibility studies. A feasibility study is different from market research in that, a feasibility study is done on a wider area, while market research is done on a small scale. The feasibility study, will help you know as to whether your business is viable in your country or not and if it will be affected by internal and external environments.


4. Lack of vision

Some small scale businesses fail because of lack of self motivation. Majority of small scale business owners if they are asked as to what they want their businesses to achieve, they will be uncertain to answer such questions, which is an indication of lacking a business vision.

The leading business players know exactly as to why they are in business and what they should do for them to be excelling at a faster rate than their competitors. Since they know exactly what they want, they know what they should do and what they should not, because they know if they spend unnecessarily, would mean failure of their business. To the contrary, the majority of small scale business owners since they do not know what they want to achieve, they do not know that removing a few dollars from their businesses and use it in any form of entertainment would mean decreasing their potential capital, which would bring more profits in future.


5. Miscalculated loan

A lot of small scale business owners they seek a loan without knowing how the loan will impact their businesses. Loan is good to fund your business, but not each and every loan is worth taking. As some loans will bring certain business problems which would not be there if the loan application was not considered.

As a business entrepreneur it is worth to be performing a few calculations before taking any loan which will help you make an informed decision. Some financial mathematics calculations will help you see that taking a loan will result in negative cash flows which will be a problem for your business. Similarly, some loan will quickly accelerate your business or businesses which will be quite good.


In conclusion, this article has uncovered 5 reasons why the majority of small scale businesses do not make it in their business opportunities and it has also given a few tips on what they should do and what they should avoid.

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