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Business Failure Reasons: Factors That Will Cause Your Business to Fail

BY: Deena David | Category: Careers | Submitted: 2010-04-30 11:05:59
 
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The fear of failure is one main reason why may people fear to start their own businesses. There are factors, both internal and external that can cause your business to fail. Statistics show that at least two-thirds of new businesses fail after the first two years, forty-four percent fail after the first four years. Every new business has a fifty percent chance to fail.

Lack of sufficient funds.

This is one big cause for the failure of a new business. Some business owners start the business with insufficient capital, with the hope of raising more as the business progresses. Unfortunately, this hope is mostly not fulfilled and the business is plunged into financial difficulties. Unpaid bills pile up, staff are owed several months salary arrears and there are no funds to buy materials and equipment for the provision of services and production of goods. This may cause your business to fail.

Poor management skills.

Most business owners have the technical knowhow but lack the management skills to run the business. Big companies have different managers for finance, accounts, human resource, IT and sales and marketing, but a small business owner is everything in the company. He is the accountant, sales manager, marketing manager, human resource manager and sometimes the IT manager as well. This is a sure recipe for failure it is impossible for one person to have adequate knowledge in all these areas.

Reason for starting the business.

Starting a business for the wrong reasons can also cause the failure of the business. Businesses are started for many reasons; t o make more money, to have your independence, or maybe have more time with your family. Think critically about your reason for starting the business, if it is one of the above named, your business has a greater chance of failure. Only businesses started for the good reasons can survive; you have a passion and love for what the business is to do or you are physically fit for the strength needed to run the business.

Lack of planning.


If you start your business without planning, you are starting to fail, the business will not work. Just because you have the passion and the drive to start a business will not make the business survive. You need to plan ahead. You should plan on where to start, how to continue and where to end. The scope of your business must be well defined. Your business will fail if your fail to define the vision, goals and keys to success of the business. You also need to define the level of the workforce your need, source of financing for the business, marketing and promotional activities and so on.

Bad feedback from customers.

One cause of failure of businesses is when people tell you things are fine when they are actually not fine. Business owners tend to ask for feedback from friends and family, who may not always give you the feedback you need, but will tell you what they think is nice to say. Nobody wants to incur your displeasure, or tell you what they think is not so nice.

Take steps to evaluate your business well, especially when it is a new one, to prevent it from failure. Seek help when you feel you encounter any of the factors that you think will cause your business to fail.

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