Business Rescue Explains What Causes a Business to Fail?


Business Failure is more common than you think! Read on to find out what causes business failure that commonly requires professionals to perform business rescue!

Business FailureOne of the most avoided topics in any aspect is business failure. In business though, it is something that needs to be understood and never be denied. This is because every single day, many businesses fail for numerous reasons.

Laying out the figures that support this statement, did you know that approximately 90% of all small businesses fail within the first two years of operation? That is according to the United States’ Small Business Administration. The Harvard Business School also estimates business  failure rates under specific conditions: 40% if we define failure as investors losing large amounts of money put into their companies; 70-80% if failure is delineated as the inability to acquire the expected business turnaround or return of investment (ROI); and a whopping 90% if business owners define failure here as not being able to meet a certain goal or projection.

So what causes business failure?

Whether you’re just starting up or you’re already getting geared up for a business rescue, the first step is always to determine where you are hemorrhaging. Here’s a list of some of the more common reasons attributed to business failurel:

• Your business itself. Does your product or service hit the present world’s demands? While it still holds true that you should center your business on a product or service that you both know and love, it is not an excuse to not create a detailed business plan. You also need to consider the profitability of a possible business. Many businesses fail because of lack of extensive planning that is essential for understanding the market, knowing where they need to fit in, knowing their competition, and all other essential information for an entrepreneur.

• Deficient funds. This is main cause of business failure. As a way to getting held back of the money they spent for business infrastructures and legal papers, they go on an abrupt decision to start off immediately. Wrong. This lack of cash cushion will immediately restrict any business’ capacity to innovate as well as greatly threaten its potential growth and stability. Experts say that business owners should save at least six months worth of expenses for their businesses as an advanced preparation for unexpected problems and unanticipated expenses.

• Poor Marketing and Promotion. Successful businesses pursue sound marketing opportunities. Without appropriate and effective advertising strategies, your business’ success is left hanging by a thread. Advertisements or promotions are important investments since they will let people know more about your products and/or services. Also in parallel with today’s growing technology, it helps a lot for a business to keep one or two social media accounts like Facebook or Instagram.

• Wrong Location. Accessibility is also one of the key considerations when putting up a business. Unless it’s a 5-star restaurant, nobody would want to go on say, a highly remote, deserted island for merely a hole in the wall experience. Build your business reputation first in place where a large population of potential customers or clients is already established, then you can venture on to other places.
• Poor managerial skills. This includes not following the business plan, weak internal controls, poor execution, poor delegation skills, poor communication skills, inability to maintain the company’s reputation, hiring the wrong people, and ineffective time management.

• Lack of innovation. Lack of variety for a business invites a fatal danger. It is important for you to experiment on some sort of diversification to ensure sales. As an example, the hand-held Tamagotchi may be way off the market today, but just in early 2013, Bandai released an enhanced version of the original 1996 Tamagotchi as a free iOS and Android app named “Tamagotchi L.i.f.e.”. Big companies like Apple, Coca-Cola and Google also set good, if not the best examples as they are in constant search for innovation. Business categories that are in crucial terms to persistently look for “something new” are book and music stores, printing, electronics technology, fashion, and food.

• Economic issues. Business owners should be aware of economic conditions, even if they are beyond managerial control. You should know that when the unemployment rate is high, business failures possibility decrease; and when GDP is high, the possibility of business failures decrease. Other issues that you need to follow are government regulations, changes in international trade, taxes, and even the weather.

• Poor Business Consulting. Every business owner, regardless of how big or small your business is, needs top quality professional advisers. Neglecting this need is one of the most common business failure causes that often gets unnoticed. And though this might not be easy for you as a businessman, you need to humble yourself and look for different sources of advice.

Prevention being better than cure is not only applicable to the health sciences but to the business industry as well. Knowing the most common causes is also an already proven rescue tactic for your business on the verge of total failure. But it doesn’t end there. You know the cause, you’ve seen the effects, and so it’s time to undertake the necessary actions in order to succeed.

This entry was posted in Blog by Trevi Lim. Bookmark the permalink.

About Trevi Lim

Trevi Lim is a businessman, pharmacist, coach, mentor, entrepreneur, philanthropist, author and speaker. He went from working over 80 hours a week as an employee to now multi-business owner in less than 7 years. As founder and CEO of BusinessRescue, he specialises in helping turning businesses around and grow businesses to the next level. He is a passionate mentor and teacher who wants to show people how to achieve financial freedom through their business.

Comment and Share!

Leave a Reply

Your email address will not be published. Required fields are marked *