Pitfalls That Ruin Businesses, How to Avoid Them

1. Insufficient capital

In order to function, businesses need money, and a good share of it. Startups usually have trouble finding the resources to start -- either finding funding, attaining credit or pooling personal financial resources to try and make ends meet. More experienced companies

usually suffer from insufficient capital when their spending starts to outweigh their revenue.

Keep a handle on your capital situation by monitoring your cash flow. Closely monitor your expenses, and don’t be afraid to make cuts if you need to. The earliest stages of your company’s growth are the most vulnerable to insufficient capital, but that doesn’t mean you’re out of the woods once you’ve been around a few years. Watch your numbers closely.

2. Poor growth speed

Another key reason for business failure is an inappropriate growth rate. For most entrepreneurs, that reads as “not growing fast enough,” but growing too fast can be a problem too.

Not growing fast enough means you’ll be expending lots of money, but you won’t have the customers or the revenue to exceed it. Growing too fast comes with a different set of problems -- demand becomes too high, resources become overworked or poorly trained, and your customers have inconsistent experiences.

3. Competition woes

Never underestimate your competition. Competition can crush your business totally if you aren’t careful, especially if you haven’t taken the time to fully understand it. Startups based around a new idea sometimes get too sure of themselves, neglecting to keep a watch on the markets -- competition isn’t necessarily a bad thing, but you need to make sure you differentiate yourself in a way that makes your company seem like the more appealing service.

4. Internal strife

Internal strife can tear a company apart, especially during the early stages of development. In many startups, entire departments are reliant on a small group of workers, and if all those workers leave -- the department is, in effect, crushed immediately. If there is a disagreement between department heads over the direction of the company, the entire enterprise could be thrown in turmoil, and customers could suffer as a result.

Even bigger, more tenured enterprises can fall apart due to internal strife -- just at a higher level. If the CEO and the board of directors cannot reach agreements, or if partners cannot resolve a dispute, that tension trickles down, and eventually, the whole company suffers the consequences.

5. Dependence

Too many companies fail because they were overly dependent on one thing. Maybe that’s a highly valuable customer. Maybe it’s a very talented and experienced worker. Maybe it’s just an environmental condition that allows for the company to be successful.

Customers can opt out. Workers can quit. Environmental conditions can -- and will -- change. If you allow any part of your business to be dependent on anything, you’re setting yourself up for disaster (or at least a huge gamble). Instead, hedge your bets by investing in multiple variations and multiple, complementary dependencies.

By no means are these five pitfalls intended to cover every possible disaster that could befall your company. There are plenty of other dangers that could weaken your brand or compromise your internal structure -- but these are some of the most common and some of the most preventable.