Top Reasons for Business Failure
From Entrepreneur Magazine and Yahoo are the top reasons for business failure:
- Lack of direction. Business owners often fail to establish clear goals and create plans to achieve those goals, especially before starting out, when they fail to develop a complete business plan before launching their company.
- Impatience. This occurs when business owners try to accomplish too much too soon, or expect to get results far faster than is truly possible. A good rule to remember is that everything costs twice as much and takes three times as long as expected.
- Greed. When entrepreneurs try to charge too much to make a lot of money in a short period of time, failure isn’t far behind.
- Taking action without thinking it through first. An entrepreneur acts impetuously and makes costly mistakes that eventually cause the business to fail.
- Poor cost control. An entrepreneur spends too much, especially in the early stages, and spends all their startup capital money before achieving profitability.
- Poor product quality. This makes it difficult to sell and difficult to get repeat business.
Insufficient working capital. An entrepreneur expects–and requires–immediate, positive cash flow that doesn’t occur, leading to the failure of the business. - Bad or nonexistent budgeting. An entrepreneur fails to develop written budgets for operations that include all possible expenses.
- Inadequate financial records. An entrepreneur fails to set up a bookkeeping or accounting system from the beginning.
- Loss of momentum in the sales department. This leads to a decline in cash flow and the eventual collapse of the enterprise.
- Failure to anticipate market trends. An entrepreneur doesn’t recognize changes in demand, customer preferences or the economic situation.
- Lack of managerial ability or experience. An entrepreneur doesn’t know or understand the important skills it takes to run a business.
- Indecisiveness. An entrepreneur is unable to make key decisions in the face of difficulties, or decisions are delayed or improperly made because of concern for the opinions or feelings of other people.
- Bad human relations. Personal problems and conflict with staff, suppliers, creditors and customers can easily lead to business failure.
- Diffusion of effort. An entrepreneur tries to do too many things, thus failing to set priorities and focus on high-value tasks.
Of course, as I’ve written before, the total number of business failures are over-estimated and most causes can be mitigated with some basic business skills. 🙂
(via Be Excellent)