The lack of leadership, the lack of clear goals or the lack of the right team are some of the reasons that lead to the failure of many companies. But there are other reasons preventing success in the SME ecosystem. Reasons range from market fluctuations to internal disorganization of processes. In all of these variables there is a constant that is always present. It’s about planning. Companies that plan poorly or not at all have numbered their days.

Planning should be at the heart of any organization. Whether it is financial planning or strategic planning, the truth is that planning allows companies to anticipate potential risky situations. And also identify potential business opportunities. Not being able to anticipate and respond to critical situations is just as serious as missing opportunities for improvement or growth.

Plan to avoid mistakes

Data created a list that includes the top 10 reasons small and medium-sized businesses fail:

bad planning. What sounds good on paper may not work in real life. It is important to research and plan. And clearly define both the value proposition and the points of differentiation from the competition. Companies need to know their potential and real customers well. Knowing what they buy, why, how, when or which channel they use is crucial to adapt to the demands of an increasingly demanding customer. On a financial level, besides everything that has been said, it is important to plan for cash flows. In this way, the company knows at all times how far it can go with its liquidity reserves.

customer ignorance. In a globalized and hyper-connected environment, you need to know your customers as well as possible. And to put the principle “the customer is always right” into practice. Obviously in a figurative sense. But the idea is to provide customers with the products and services they want, when and how they need them. In other words, raise the quality of customer service to the maximum. You need to “listen” to the customer and analyze all the information they provide. ERP systems with business intelligence functionalities are the key to providing the business intelligence that is required in the digital age.

Bad inventory management. If the company mismanages its inventory, it will fail. It’s as simple as that. Poor management will result in shortages or excess inventory and that will silently destroy cash flow. It’s a common mistake made by companies that don’t understand their sales patterns. The best way to counteract this is to use an ERP that allows you to automate functions, provide detailed reports and ultimately help make warehouse processes more efficient.

An ERP that allows, for example, the monitoring of the most/least sold, most/least demanded or most/least profitable items. When goods are bought, stored, and sold slowly, they can lose value, deteriorate, or become obsolete. This forces them to be sold at deep discounts or not at all. Capital tied up in large inventories can shake the foundations of the business.

Unsustainable growth. In business, perseverance wins the race: expanding too long and unchecked usually means borrowing, loans that can choke the business if, for example, the market changes abruptly. Attempting to grow more than you are capable of can affect quality. Instead, it’s better to practice business intelligence and see which clients are best suited – profitable – and how each operation is approached financially. Saying NO is part of entrepreneurship.

Missing sales. It is better to sell well than to sell a lot. Giving the majority of sales to a single large customer or to a small number of customers entails great risks. The best way to achieve business goals is to have analytical information and use it to build a solid sales strategy.

try to cover everything. Skills and time are finite. Delegating is key. This delegation may imply hiring additional resources. Or invest in software that minimizes and simplifies the work involved. Delegating responsibilities to the right people with the right technology will be critical.

The importance of administrative work is underestimated. Much of the management of a company revolves around administrative functions. From running the business to accounting to all business processes, administrative tasks can be time-consuming. One solution may be to outsource routine tasks. Another is to support these repetitive functions with the right technology. That saves time and money. And above all, the certainty that there are no conceptual or formal errors.

Obsess and don’t correct. It’s easy for companies to become obsessed with their business idea, even when the evidence suggests it’s not profitable. For example, anchoring yourself in the decline in physical space sales is a mistake. Opening up new channels – for example e-commerce – could be the solution.

lack of data. Or rather lack of data analysis. Gathering the information is key. But it is even more important to extract the knowledge that preserves it. For example, not knowing real-time business performance limits your ability to make intelligent, data-driven decisions. For example, global visibility of income and expenses is important to avoid making blind decisions. The key to a company’s success lies in improving the efficiency, agility and quality of business operations. And all this while maximizing customer benefit. This requires data, information and, above all, knowledge.

mismanage. Management is all about attitude and mindset and directly affects the bottom line. When the company is doing well, one tends to think that everything is being done in the best possible way. In the most productive way. And it’s not always like that. Management by intuition or smell will end up taking its toll. Instead, it’s better to channel the administration of a company into an intelligent ERP that manages information, automates functions and gives the certainty of doing things really well. An ERP that allows to evaluate, analyze and make corrective or driving decisions.

Management mistakes, avoiding mistakes, SME success, failure, why SMEs fail