Entrepreneurship: 4 factors that lead companies to close their doors – 06/22/2022

Those who live with me know that since I was a child I have loved series and, more precisely, “A gang do Chaves”, a classic from the 70s that is still seen today. It was precisely watching this series that I had my first contact with entrepreneurship and financial education.

As everyone knows, the comedy shows the interactions of the residents of a village. Chaves is an eight-year-old orphan boy who lives messing with some residents.

How is an orphan boy who lives in a barrel indisputably an entrepreneur?

The answer lies in his actions, as the boy sold unused bottles, set up a refreshment stand, in addition to selling churros and being a waiter at a restaurant. Of course, all this with a dash of humor and laughter. The fact is that the boy was tireless and his biggest motivation was always the need to get a meal.

He chose to undertake with what was within his reach and giving up was never an alternative. It is important to point out that every time something went wrong in his “business”, it was because of some mistake he made in his management.

Regardless of the context and motivation to undertake, it is essential to reflect on the challenges you may encounter.

The study (Survival of Companies in Brazil), carried out by Fundação Getúlio Vargas, in partnership with Sebrae, showed that a third of new Brazilian companies close within two years. In addition to gathering this information, the study evaluated some of the reasons that lead to this outcome — finding four groups of main factors:

  • personal situation
  • business planning
  • business management
  • Entrepreneurship training in business management

That is, the reasons that lead an entrepreneur to close the company before completing two years of existence can range from problems prior to opening the business to failures during management.

Check out below 4 factors that influence the premature closure of companies, and that will help the novice entrepreneur not to make the same mistakes:

1) Lack of a business plan

Imagine a professional who has been unemployed for several months and has no prospects of getting a new job. Faced with this situation, he decides to open his own business. After a week he starts buying and selling perfumes.
Unfortunately, the chances that this entrepreneur will have to close the company within two years are very high, as there was no planning about the activities. What is your target audience? What should be the sale value of watches? How can he promote the products?

The planning stage that precedes the opening of a company is as important as knowing how to manage it after the activities have started. It is at this moment that the entrepreneur can see the best business opportunities and assess the feasibility of his project — even before investing his money.

On the website/portal of Sebrae (Brazilian Service of Support to Micro and Small Enterprises), you will find tips and content on entrepreneurship for free, as well as instructions on how to build a business plan.

2) Financial unpreparedness

A big mistake that leads to the premature closing of Brazilian companies is the lack of financial preparation. You have to be realistic: a company that is starting in the market will hardly be able to make a profit in the first few months — and the entrepreneur needs to be prepared to deal with this difficult moment before achieving results and profit.

Another extremely important tip is not to mix your personal account with the company account. Divide all income and expenses into separate budgets and accounts. If possible, stipulate a pro-labore (businessman’s salary) and direct this amount to a personal account. This way you will be able to visualize and plan your budget according to reality.

3) Ineffective marketing

Especially for a company that still seeks to consolidate its place in the market, marketing is an important ally to increase visibility and build authority among customers. For this reason, ineffective marketing can affect the sales results of these businesses.

Nowadays social networks are indispensable tools for maintaining and attracting customers due to the fact that, most of the time, it is through them that customers consult the veracity and quality of the company, see comments from other people, social engagement of the company and even her relationship with clients.

Certainly, there are already competitors operating in the market – even if indirectly. For this reason, being in tune with digital marketing and knowing how to differentiate yourself from other companies is very important for a new business to be able to attract customers.

4) Absence of goals and objectives

Goals for the future are what move a company towards growth. In the absence of clear goals, any result achieved can be considered satisfactory — causing the company to stagnate and not move forward.

If you understand that you have a profile, disposition or are of extreme need, go in search of your goals and undertake, but try to do it with awareness of all the challenges that may arise on this journey. Try not to engage just out of necessity or because you no longer want to take orders from a manager.

Keep in mind that entrepreneurship is more than selling something or providing a service. It is having the ability to identify problems and opportunities, develop solutions, and invest resources in creating something positive for society. So try to do it the best way possible.