Preventing Small Business Failure – Retailers, Wholesalers, and Manufacturers

Editorial Note: We are an inventory management software provider. While some of our blog posts may highlight features of our own product, we strive to provide unbiased and informative content that benefits all readers.

In the United States, around 595,000 businesses fail or close each year. 

The business world is becoming increasingly competitive. With the rise of technology and globalization, it’s more challenging than ever for small businesses to stand out from the crowd. However, it’s not impossible. By following the right strategies, small businesses can thrive in a competitive market.

“20% of small businesses fail in their first year, 30% of small business fail in their second year, and 50% of small businesses fail after five years in business. Finally, 70% of small business owners fail in their 10th year in business.“

Why Do Small Businesses Fail?

A study by CBInsights analyzed the reasons why 101 startups failed, according to their founders. Here are the top reasons:

1. No market need: 42% of businesses failed because there was no demand for their products or services.
2. Ran out of cash: 29% of businesses failed because they ran out of money.
3. Wrong team: 23% of businesses failed because they didn’t have the right team in place.
4. Outcompeted: 19% of businesses were outcompeted by their rivals.
5. Pricing and cost issues: 18% of businesses failed due to pricing and cost issues.
6. Poor product offering: 17% of businesses failed because they offered a poor product or service.
7. Lack of business model: 17% of businesses failed because they didn’t have a clear business model.
8. Poor marketing: 14% of businesses failed because they did not market their products or services effectively.
9. Ignored customers: 14% of businesses failed because they ignored the needs of their customers.

These are the most common reasons why small businesses fail. By understanding these factors, entrepreneurs can increase their chances of success.

In this blog post, We will discuss how Cash Flow Inventory can prevent the above failing reasons for small businesses that sell products including Retailers, Wholesalers, and Manufacturers. Let’s start.

Preventing Small Business Failure with Cash Flow Inventory:

To prevent small business failure, Cash Flow Inventory offers strategies to address common challenges. It emphasizes monitoring sales trends, aligning inventory with customer preferences, and ensuring optimal stock levels to counter market need concerns. By avoiding overstocking and stockouts, and integrating real-time tracking, Cash Flow Inventory safeguards against cash depletion and the risk of being outcompeted, ultimately helping businesses sustain success.

1. No market need: 

To Prevent this, Cash Flow Inventory meticulously monitor sales trends and customer preferences.

This entails ensuring an appropriate inventory of products in optimal quantities. Typically, demand does not suddenly plummet to zero overnight.

Let’s consider a scenario: if you made 120 sales of the iPhone-14 last month, and the iPhone-15 is introduced this month, it’s improbable that you won’t make any iPhone-14 sales. This is due to price differentials and customer preferences. For instance, suppose you manage to sell 85 units of the iPhone-14 this month. Consequently, your safety stock dwindles from 450 to 305 units.

As a result, it becomes prudent to maintain a reduced stock level and adjust the reorder point for the iPhone-14 compared to previous periods.

Moving forward, in the subsequent month, if your sales decrease further, the inventory management system will adjust the safety stock and reorder points accordingly. Over time, the sales of the iPhone-14 will naturally diminish, ultimately leading to a decline in both safety stock and reorder points. This adaptive approach ensures that your stock consistently aligns with prevailing customer demands.

• Analyze recent sales history, such as the past seven days, previous month, or previous quarter.
• Typically, demand does not suddenly plummet to zero overnight. If there is less demand, keep less stock.
• Use previous stock and do not reorder until needed. The software measures this automatically.

2. Ran out of cash:

By aligning your inventory with customer demands, you mitigate the risk of depleting your cash reserves. This approach eliminates the financial ties associated with excessive stockpiling. Continual cash flows are ensured as your inventory remains in line with ongoing demands. Striking the balance between the appropriate inventory levels and lead times necessary to fulfill those demands guarantees that the specter of cash depletion due to inventory shortages is effectively averted.

• You have products which have demands.
• So, No option to lock capital for unnecessary stocks.
• No risk to Ran out of cash because you have products, customers as well as profits.

3. Wrong team:

Cash Flow Inventory can help businesses to track inventory levels in real time by integrating with barcode scanners and other devices. Cash Flow Inventory can be used to identify problems early on, such as low inventory levels or stockouts. For example, if a business uses Cash Flow Inventory to track its inventory levels, it will be alerted immediately if a product is about to run out of stock. This will allow the business to take corrective action, such as placing a new order with the supplier.

A business that uses Cash Flow inventory to automate its order processing will be able to process orders more quickly and accurately. This can free up employees to focus on other tasks, such as customer service.

• With smart tools its easy to make wise decisions.
• This software gives real time data visibility, Well organized processes and Data driven analytics.
• Finally, Here its easy to scale up team performance.

4. Outcompeted:

Being outcompeted means that a business is unable to compete effectively with its rivals. This can happen for a number of reasons, including:

• The rivals offer a better product or service. This could be because the product or service is more innovative, higher quality, or more affordable.
• The rivals have a better marketing strategy. This could mean that they have a more effective advertising campaign, a stronger social media presence, or a better understanding of their target market.
• The rivals have a better distribution network. This could mean that they have more stores, a wider reach, or a more efficient supply chain.
• The rivals have a lower cost structure. This could mean that they have lower labor costs, lower overhead costs, or better negotiating power with suppliers.

When a business is outcompeted, it can lose customers, market share, and revenue. In some cases, it can even lead to bankruptcy.

How Cash Flow Inventory Helps to Avoid Being Outcompeted:

Cash Flow Inventory can help businesses avoid being outcompeted in a number of ways, including:

1. Keeping up with demand: Cash Flow Inventory can help businesses track sales data and trends to determine the optimal safety stock and reorder points for each product. This helps to prevent stockouts, which can lead to lost sales and customer dissatisfaction.
2. Organizing tasks: Cash Flow Inventory can help businesses organize their inventory data and tasks, such as purchase orders and shipments. This can help businesses to save time and improve efficiency.
3. Tracking and reducing costs: Cash Flow Inventory can help businesses track their inventory costs, such as purchase prices, shipping costs, and carrying costs. This information can be used to identify areas where costs can be reduced.
4. Preventing overstocking: Cash Flow Inventory can help businesses to prevent overstocking by tracking inventory levels and sales data. This helps businesses to avoid spending money on inventory that they do not need.
5. Preventing stockouts: Cash Flow Inventory can help businesses to prevent stockouts by tracking inventory levels and setting safety stock levels. This helps businesses to ensure that they always have enough inventory to meet customer demand.

By using Cash Flow Inventory, businesses can improve their inventory management and avoid being outcompeted by their rivals.

5. Pricing and cost issues:

Cash Flow Inventory helps to offer better pricing by reducing costs in various ways including streamlining operations and automation helps to reduce employee costs, preventing overstocking reduces unnecessary operations, holding cost and free up capitals from unnecessary stocks, preventing stockouts prevents stockout cost.

By reducing costs Cash Flow Inventory help businesses to give better competitive pricing with ensuring a good profit margin.

6. Poor product offering:

When you have products which have demands, you cost is minimal as much as possible you can offer good products with lowest possible prices.

7. Lack of business model:

17% of businesses failed because they did not have a well-defined plan for how they would make money.

This article is for retailers, wholesalers, and manufacturers who sell products to make profits. So, for these business owners, a lack of business model is not a valid reason for their failure.

8. Poor marketing: 

Though Cash Flow Inventory is an Inventory management software and not directly related to marketing it can impact your marketing in various ways.

• By ensuring right products helps better reputations.
• By reducing costs its easy to stay competitive with pricing.
• By streamlining operations its possible to give better services.
• By keeping customer details including emails, phones, addresses and sales histories it helps to make effective marketing strategies and campaigns.
• By free up capitals from unnecessary stocks, its can invest on marketing.

9. Ignored customers:

Cash Flow Inventory track your sales and customer demands where you are aware of customers needs and wants. Additionally, Cash Flow Inventory give features to update inventory levels based on customer demands where you need not any additional steps to balanced your business with customer needs.It is done automatically by using Cash Flow Inventory.

Conclusion:

The causes of failure are not based on my personal viewpoint; they stem from research carried out by CBInsights. Our creation, Cash Flow Inventory, serves as an Inventory Management Tool designed to cater to the needs of retailers, wholesalers, and manufacturers, thereby generating profits through these services. However, during my online study of the factors contributing to the failure of small businesses, I observed that our services have the potential to mitigate nearly all the failure triggers identified in CBInsights’ research.

In light of this, I have composed this post to provide you with insights on how our services can safeguard your business from failure while simultaneously bolstering our own profitability – a true win-win scenario. The decision to put these insights to the test rests entirely in your hands.