Resource Library Blog Bookstore Glossary Newsletters Training Videos Articles & Guides More Tools Press Center BROWSE BY TOPICTen Common Causes of Business FailureTry Free SWOT Analysis NowBe on target. Identif y your strengths, weak nesses, opportunities and threats.C r e a t e S W O T N o w (Its free)Failure is a topic most of us would rather avoid. But ignoring obvious (and subtle) warning signs ofbusiness trouble is a surefire way to end up on the wrong side of the business survival statistics.What is the business survival rate? Statistically, roughly 66 percent of new businesses survive twoyears or more, 50 percent survive four years or more, and 40 percent survive six years or more,according to the study “Redefining Small Business Success” by the U.S. Small BusinessAdministration. Further, companies that have employees (instead of one-man shops), college-educated owners, and those that have good financing tend to survive longer. Also supported by thenumbers in the study, manufacturers overall have a better chance of staying alive compared toservice and retail firms.With this information as a backdrop, I’ve compiled a list of 10 causes of failure from personalexperience and informal discussions with local business owners. Hopefully, we can learn what not todo and increase our odds of survival! 1. Failure to understand your market, your customers, and your customers’ buying habits. Two easy questions: Who are your customers? And why do they spend their money with you? You should be able to clearly answer in one or two sentences. Customers are the only people that put money in your account. Without them, you will not survive. 2. Choosing a business that isn’t very profitable. Even though you generate lots of activity, the profits never materialize to the extent necessary to sustain an on-going company. We all
learned the dot-com (obvious) lesson that to survive, you must have positive cash flow. It takes more than a good idea and passion to stay in business. 3. Failure to understand and communicate what you are selling. You must clearly define your value proposition. What do you do that can help or benefit me? Once you understand it, ask yourself if you are communicating it effectively. Does your market connect with what you are saying? 4. Inadequate financing. Cash is king. If you don’t have enough cash to carry you through the sales cycles and downward trends, your prospects for success are not good. When businesses go looking for lenders to provide that cash, they quickly find that funding sources are finicky and difficult to please. 5. Failure to anticipate or react to competition, technology, or other changes in the marketplace. It is dangerous to assume that what you have done in the past will always work. Challenge the factors that led to your success. Do you still do things the same way despite new market demands and changing times? What is your competition doing differently? What new technology is available? Those who fail to do this end up obsolete. 6. Overdependence on a single customer. Pay attention to your revenue sources. If you have a customer that is providing a majority of your income, ask yourself what would happen if they left or went out of business. Where would you be? Whenever you have one customer so big that losing them would mean closing up shop, watch out. Having a large base of small customers is a safer beat. 7. Failure to define your product/service offering. Trying to do everything for everyone is a sure road to failure. Spreading yourself too thin diminishes quality. The market pays excellent rewards for excellent results. Excellent results come from doing what you do and doing it well over and over again. 8. Keeping your house in order. Slow and steady wins every time. It’s hard to believe that too much business can destroy you, but the textbooks are full of case studies. To serve your customers well you have to focus on quality, delivery, follow-thru, and follow-up. How do you feel when your suppliers say they are “slammed” all the time? Like you are inconveniencing them? Don’t treat your customers in the same manner. Going after all the business you can get drains your cash and actually reduces overall profitability. When you go after it all, you usually become less selective about customers and products, both of which drain profits from your company. 9. Poor management. Management of a business encompasses a number of activities: planning, organizing, controlling, directing and communicating. The cardinal rule of small business management is to know exactly where you stand at all times. A common problem faced by successful companies is growing beyond management resources or skills. 10. No planning. If you don’t know where you are going, you will never get there. No clear picture of success will lead to status quo or worse. To grow and be successful you have to actively work on your business. As the saying goes, failing to plan is planning to fail.For more information: If you have any questions regarding these articles, or desire furtherinformation, please contact us.
Business failureFrom Wikipedia, the free encyclopedia This article may contain original research. Please improve it by verifying the claims made and adding references. Statements consisting only of original research may be removed. (March 2009) This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (May 2011)Joes was one of the businesses to fail in 2009.Business failure refers to a company ceasing operations following its inability to make a profit or to bring inenough revenue to cover its expenses. A profitable business can fail if it does not generate adequate cashflow to meet expenses.
Contents [hide]1 Reasons2 See also3 References4 External linksReasonsBusinesses can fail as a result of wars, recessions, high taxation, high interest rates, excessive regulations,poor managementdecisions, insufficient marketing, inability to compete with other similar businesses, or alack of interest from the public in the businesss offerings. Some businesses may choose to shut down priorto an expected failure. Others may continue to operate until they are forced out by a court order.After closing, a business may be dissolved and have its assets redistributed after filing articles ofdissolution. A business that operates multiple locations may continue to operate, but close some of itslocations that are under-performing, or in the case of a manufacturer, cease production of some of itsproducts that are not selling well. Some failing companies are purchased by a new owner who may be ableto run the company better, and some are merged with another company that will then take over itsoperations. Some businesses save themselves throughbankruptcy or bankruptcy protection, therebyallowing themselves to restructure.See also
10 Causes of Small Business Failure and Howto Avoid Them10 Causes of Small Business Failure and How to Avoid ThemShelly K, Yahoo! Contributor NetworkSep 5, 2006 "Share your voice on Yahoo! websites. Start Here."MORE:Small Business FailureSmall Business SalesSmall Business Resourcestweet2 PrintFlagPost a commentThere are a variety of reasons why a small business often fails. There are some steps thatsmall business owners can do to avoid them. Here are ten causes of small business failureand how to avoid them.1. Most small business owners dont have enough money saved up. You need to save up atleast six months of worth living expenses along with six months of worth of expenses foryour business too.2. Some companies dont have enough advertisements through out the year. You need tohave do more advertising in order for people to know about your company. Advertisementsare the most important to spend on since it will help your business become even moresuccessful.3. Some companies fail since they dont generate enough sales. You need to do moreadvertising so more people know about your company or lower the prices. You need to do afew specials in order to get more sales.4. The company doesnt hire enough staff. You need to hire more staff when you have toomuch work too handle. You dont want to get behind on the work otherwise your customerswont be happy.
5. The company doesnt have a high enough budget. This is where most companies fail atsince they dont have enough money to pay everything. The business owner needs to havemore money before starting the company or get a business loan.6. The company cant survive during the slow season so they often fail. The company needsto figure out a way to generate enough sales or save up enough money to survive during theslow season of the company.7. A company doesnt have enough money to expand the business even though it needs too.The company needs to get a business loan, save money, or even outsource the worksomehow.8. The company doesnt have enough money to keep a professional image. Most companieslose sales when they dont look professional or even stay professional. They need to have thebest of everything in order to succeed.9. Some try to be cheap on products or service then they often fail. In order to stay successfulin a business then you cant sell cheap products or service cause the only result is people notbeing impressed. You want people to feel they arent getting ripped off.10. Some try to violate city rules or state regulations. This is a big reason why companies goout of business real quick. You need to follow city rules and follow the state regulationsotherwise you wont be in business anymore.
Strategy theoryBusiness failureStart up businesses have a very high failure rate in this country with as many as1 in 3 failing in their first three years. The reverse side of the coin is that aroundtwo thirds survive and some go on to prosper and expand. Key reasons forbusiness failure include:Poor marketingSuccessful modern businesses are ones that understand and meet therequirements of their customers. Detailed market planning and market researchis therefore an essential for new businesses, to find out details such as thepotential size of the market, the extent of competition, as well as consumerpreferences and tastes.Cash flow problemsMany businesses struggle through poor cash flow management. It is all very wellhaving a good idea and a good product but it is also necessary to be able to meetshort term cash outflows. Many businesses try to grow too quickly, and end upborrowing too much money externally, resulting in crippling interest repaymentcharges.
Poor business planningBusiness planning should cover aspects such as marketing, finance, sales andpromotional plans, as well as detailed breakdowns of costings and profitpredictions. It is often said that failing to plan, is planning to fail.Lack of financeInsufficient finance often means that businesses are unable to take opportunitiesthat are available to them, or have to compromise - going for high cost solutionsto problems, rather than lower cost ones that would yield greater competitiveadvantage.Failure to embrace new technologies andnew developmentsIn a fast changing world leading businesses are ones that make best use ofadvanced modern technologies in an appropriate way. Firms that operate withoutdated technologies and methods frequently find themselves at a costdisadvantage over more dynamic rivals.Poor choice of locationLocation is a very important business decision. A good location is one thatappeals to large numbers of customers, while at the same time minimising costs.For example in retailing it is often a mistake to choose a low cost location, that isnot visible to customers. However, conversely there are considerable costadvantages to out-of-town retailers that customers are prepared to travel to visit.Poor managementWeak and inexperienced management is one of the major causes of business
failure. Managers have to work extremely hard, and to understand theircustomers needs, and the business that they are in if they are to be successful.Poor human resource relationsOften a cause of failure. Successful businesses motivate their employees to workhard to help the business to succeed.Lack of clear objectivesSuccessful organisations have clearly focused and communicated objectives thatenable everyone in the organisation to pull in the same direction.Read more: http://businesscasestudies.co.uk/business-theory/strategy/business-failure.html#ixzz2M03JxiJuFollow us: @Thetimes100 on Twitter | thetimes100casestudies on Facebook