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5 reasons why businesses overcome failure

How to thrive in the face of failure: 5 reasons businesses pull through

Only half of Australian small businesses survive beyond their fourth birthday. While there’s no magic formula for success, there are a number of common themes to adversity – and those who overcome it. Here’s how to help your small business survive when starting out.

Cash flow is king

The biggest cause of small business failure is poor cash flow. This is usually the result of being undercapitalised from the outset, poor management, miscalculations of pricing or overly optimistic sales targets.

No business can survive without a good cash flow calculator, so we’ve put together a template to get you started. It should be used for both tracking your incomings and outgoings, and can help when forecasting the all-important issue of scalability.

You should also put together a system for effective money management, including:

  • Efficient invoicing.
  • Accepting advance deposits, and flags.
  • Following up late-paying customers.

Strategic planning

An ASIC report on insolvencies in Australia found that 46% of failed businesses suffered poor strategic management. Put another way, whether you’re selling a product or a service, understanding market demand is critical – as is knowing where you fit in that market.

Your plan should be both a guiding document for the business and outline a vision for potential investors and financiers. It needs to answer the key question: why is your business uniquely qualified to succeed?

We’ve pulled together a template for writing a business strategy and created a tool for SWOT analysis to help you develop clear and measurable targets.

Knowing the ‘why’

To know who your customers are and what they want, you must first know yourself. Too many small businesses fail because business owners do not establish their ‘why’ – a tangible reason for being there in the first place.

One TED Talk on business strategy suggests most enterprises are built around a WHAT > HOW > WHY model, whereas successful leaders work from the inside out. Owners know WHY they are in it and HOW they will do it before settling on the WHAT.

Asking for help

Starting a business may not be easy, but it doesn’t have to be lonely. Finding outside help can be a game changer, both in terms of direction and your bottom line.

Engaging a mentor through an organisation such as the Small Business Mentoring Service will provide a new level of objectivity and experience for ideas, planning and motivation. Exploring state and federal government grants can open doors for everything from wage subsidies to entering foreign markets.

Being agile and flexible

Business in our globalised world moves quickly. Anticipating problems and jumping at new opportunities are part of the DNA of successful small enterprises. Astute bosses understand there’s more than one method of operating, and they find data to back up their hunches.

Thankfully, there are a number of tools online that can help you succeed. Kissmetrics teaches methods such as A/B testing scenarios, while Businessballs is a free hub of training and learning that’s used by multinational companies. Closer to home, the Australian Bureau of Statistics has a suite of data to help small business owners research trends.

Start planning for your success by speaking to the small business experts at Prospa on 1300 882 867 or apply online for a tailored loan at a competitive rate.


The information in this post is provided for general information only and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.

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