Reasons A Business Fails

Everyone in the company must think about sales and top-line revenues every day until the company is well into the black. Avoid the mistakes that lead to business failure. Major accounting and consulting firms have done out-of-season thousands of businesses that failed. These studies conclude that most business failures have certain things in common. Every one of which you should consciously avoid every single day.

  • The first reason for business failure is a lack of direction. This is demonstrated as a failure to establish specific goals for each part of the business. In addition, a company lacks direction when it does not have a complete business plan.
  • The second reason for business failure is impatience trying to accomplish too much too soon. This is often demonstrated by spending too much on advertising at the beginning rather than building up a customer base gradually. Remember, everything costs twice as much and takes three times as long as your best guess.
  • The third reason for failure is greed trying to charge too much. Get rich quickly or sell any products or services without building a market reputation. It\’s always better to go for a reasonable profit at the beginning and raise your prices as demand increases.
  • The fourth reason for business failure is poor cost control. This is demonstrated by overspending, especially at the beginning. Remember, cash is everything. Conserve cash at all costs. When the cash is gone, the company is gone as well.
  • The fifth reason for business failure is the poor quality of the product or service. This makes it difficult to sell initially and almost impossible to sell later. Poor quality makes it difficult to get paid for what you\’ve already sold.
  • The sixth major reason for failure is insufficient working capital.

The business runs out of money because it has not budgeted ahead far enough. This is why a good business plan is so important. The seventh major reason for business failure is poor sales and a loss of momentum in the sales department. People get so busy operating the business that they forget that there is no business without sales. You must focus on selling and make all other business activities secondary to that. Remember the purpose of the business? What is the purpose of a business? Most people answer that the purpose of a business is to make a profit. However, that is not quite correct. The real purpose of our business is to create and keep a customer. Making profits is a result of creating and cost-effectively strategy to keep customers. Here are the key questions for the strategy for your business.

  • First, what business are you really in? Define your business in terms of what your customer or service does to improve the life or work of your customers.
  • Second, what is your mission? What is your vision for your business?
  • What do you really want to achieve for your customers with your product or service?
  • Describe a totally satisfied customer.
  • Third, if your business were ideal in every way, what would it look like?
  • How would people talk about your business?
  • What level of sales would you have? What level of profits?
  • How fast would you be growing each month each year?
  • What kind of products and services would you offer?
  • What kind of people would you have working for you?
  • What kind of customers would you be serving?

The more clearly you think through and answer these questions, the better your decisions and the more successful your business will be, both in the short term and in the long term. You must have a clear focus on the Seven main “P\’s” of marketing.