Why Businesses Fail – Determinant Causes

There are many reasons to determine why businesses fail. If we analyze, there are quite a few entrepreneurs who, after starting a business, realize that it was not as productive as they had imagined, even, they even totally failed in their calculations.

These people, after such great disappointment, wonder how they could go wrong to have gone bankrupt quickly and untimely.

WHY BUSINESS FAIL – 4 CAUSES WHEN STARTING

1. The real ignorance of what is going to be done

No business ensures excellent profitability simply because an idea may seem excellent to you. If you do not know the product, the service, the demand, the competition, and perhaps other factors such as the investment required, it can quickly be done to fail a business. 

2. Believe that the business idea that worked for someone else will work for me

Another cause of disenchantment believes that because someone you know has done very well in their business, they take the idea of ​​the same business, without knowing or taking into account the risks that may arise on a personal level, since not all opportunities are suitable for all types of people or circumstances and therefore are not risk-free. Their economic benefits are even less assured.

So, considering that all ideas are not for all people, we cannot say that an idea is terrible, but rather that to be fruitful, it must become an income opportunity.

Hence, there are no bad ideas because an idea or vision can become an income opportunity if developing it is taken into account to complete the business. In that case, the business can flourish, and in case, On the contrary, that is, if you do not keep order in the planning, it can fail.

The failure of a company may be due to the steps that are omitted in the process to start the venture, such as a wrong operation, insufficient capital, lack of selection of suitable personnel, poor management or neglect in the accounting system, lack of control in the financial and banking movements, among various other aspects.

3. Incorrect choice of the product

There is a mistake in choosing the product when it does not solve any problem or does not provide any benefit in the market in which it is being offered; therefore, a product becomes what we call a bad product.

4. The lack of a business plan 

Before making an idea come true so as not to make a business fail, it is vitally important to have a well-structured plan that allows you to anticipate both complications in the future and solutions.

The business plan helps to visualize all the business details when starting, from the advantages and means available to it to the same investment and financial movement.

This planning is essential to achieve an invariable economic solidity in your business, and it is noteworthy that the business plan will serve as an effective cover letter to obtain bank loans in case of need or partners who may feel interested in financing, movements, and accounting results of the commercial activity that you propose.

When starting a commercial activity, that is, a business, there is no planning for it. It is inevitable to deal with unexpected problems that, in turn, reflect ignorance, laziness to fill out all the details properly, or even disorder.

WHY BUSINESSES FAIL – 2 CAUSES IN MANAGEMENT

1. Poor business administration

The business owner must know the direction, operation, and administration of the same because if there is a business failure, it is due to the bad direction. The fault is directly yours because you are the one who leads!

2. Lack of supervision

When employees, who individually have different missions, such as manual labor, accounting, personnel management, or logistics, for example, even if one of them is to blame and therefore the business is failing, it is the Boss or Manager who is failing, because he has to be supervising and demanding reports and results in production from his employees.

You can indeed hire efficient people in the different branches you need for your business’s proper functioning. Still, the owner must be aware of all the details and has meetings every so often to discuss the details. Of the business, in terms of administration and the good results that are expected.

I hope you have learned why businesses fail and do not make these same mistakes. Tell us about your experience managing a business and what do you think are the factors that most affect your business success. 

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