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The 9 reasons why businesses fail

Starting a business from scratch is not easy. In fact, over 50% of small businesses fail in the first year and 95% fail within the first five years. Why? What goes wrong?. Below are the common pitfalls to be aware of and plan to avoid.

Poor marketing: Successful businesses are ones that understand and meet the requirements of their customers, you must know who your client is. Learn the basics of marketing and make sure that you track the success or failure of each marketing technique you use, then dump those that aren’t working.

Make certain your marketing strategy sets you apart so a customer can clearly see why they would rather go to you than a competitor.

Cash flow problems: Many businesses struggle through poor cash flow management. You need to be able to live for one to two years without income when getting started; often businesses are very slow to get off the ground. Also, you have to create and use a realistic business budget, and not constantly drain the business income on personal spending.

Tight control and monitoring is essential.

Poor business planning: A business plan should cover aspects such as marketing, finance, sales and promotional plans, as well as detailed breakdowns of costs and profit predictions. Many business owners think that dedication and hard work will pull them through. A global look at the business, frequently updated, is essential to assure success. If the skills are not present to prepare one, no other allocation would be as effective as obtaining professional assistance.
Maintaining poor books and records – which results in having no conception of profits, costs, margins, sales or customer ratios. The business owner is then unable to make intelligent decisions because of the lack of this information.
Good planning means that you’ve looked at all the aspects of your business and are prepared to handle problems when they arise. Your business plan helps you to focus on your goals and your vision, as well as setting out plans to accomplishing them.

Lack of finance: Insufficient finance often means that businesses are unable to take opportunities available to them, or have to compromise – going for high cost solutions to problems, rather than lower cost ones that would yield greater competitive advantage.

Failure to embrace new technologies and new developments: In a fast changing world leading businesses are ones that make best use of advanced modern technologies in an appropriate way. That allows them to work more efficiently

Poor choice of location: Location is a very important business decision. A good location is one that appeals to large numbers of customers, while at the same time minimising costs. If your business runs out of commercial space, you need to make sure that you are convenient to your customers, and near to your suppliers and your employees, with good easy communication routes.

Poor management: Weak and inexperienced management is one of the major causes of business failure. Managers have to lead a team to be motivated and accountable.

Poor human resource relations: Successful businesses motivate their employees to work hard to help the business succeed. Failing to develop an orientation system for new employees or to follow through on personnel development to foster a team spirit. Conversely, many owners are unable to swiftly discharge poor performers without fear or favour.

Lack of clear objectives: Successful organisations have clearly focused and communicated objectives that enable everyone in the organisation to pull in the same direction.

The author is a business adviser who has continually owned and grown successful businesses for over 19 years. He can be contacted as follows

0800 781 0414

This Business 101 article was written by Anonymous on 6/22/2006

The Author’s experience has covered a diverse set of industries and business sectors. They include engineering, retail, wholesale, property management, IT, construction and financial services (Having been fully qualified and authorised by the governments Financial Service Authority). He has managed to attract government contracts with his business. His background is in leadership, management, marketing, sales, team building and systemising businesses in order to greatly increase their value.