REASONS
FOR BUSINESS FAILURES
There
are no more than one or two reasons for business failures.
There are many. The
factors below give some selected reasons which lead to business failures:
POOR
ATTITUDE
Owner
loses interest, is not motivated.
POOR
RELATIONSHIPS
Owner
develops poor relationships with staff, suppliers, bankers, customers and does
not get their full co-operation and relationships
POOR
OR NO BUSINESS PLANNING
Not
planning ahead to establish future income, expenses, resource requirements
(staff, equipment, funds required)
POOR
FINANCIAL CONTROL
Not
giving serious attention and control to business expenses.
Giving too high a credit to customers.
Not collecting debts on time.
All this leads to not having enough money for day to day running costs
and purchasing items for business.
Not understanding ongoing financial position so that measures can be
taken if required.
POOR
RECORDS
Not
having suitable records for all business transactions.
This prevents business managers from making good business decisions.
POOR
STOCK CONTROL
No
proper stock records of what was received and what was sold and what is still in
stock. Also, holding more
stock in business than can be sold results in money being tied up unnecessarily.
Excess stock can also deteriorate or become old and out of date.
POOR
CREDIT CONTROL
This
includes not making creditors fill in proper credit forms with rules and
conditions for non-payment, on time etc.
Not specifying to customers the credit limit they can have.
Giving credit to wrong people or unknown persons.
And not ensuring that people pay accounts on time etc
POOR
MARKETING
Not
planning marketing strategies and implementing
marketing objectrives properly, resulting in ineffective advertising,
selling and distributing of goods and services.
POOR
STAFF CONTROL
Leaving
everything to staff without any
control or overall surveillance. Employing
more than enough staff or employing untrained or unsuitable staff.
POOR
TIME MANAGEMENT
Spending
time excessively in some selected areas only at the expense of other areas that
get neglected and give rise to major problems.
POOR
KNOWLEDGE OF BUSINESS ENVIRONMENT
Not
looking for changes in the business environment which present threats and
opportunities to the business. Not
responding to threats which may ultimately cause business failure.
Not accepting opportunities which will allow the business to thrive.
Failing to identify your target market due to poor market research.
Failing to adapt your product to meet customer needs and wants.
POOR
EXPERIENCE
Not
knowing enough about the industry in which one operates.
Not knowing about buying, selling, interacting with customers,
controlling and handling money etc.
POOR
STOCK OF TECHNOLOGY
Using
outdated technology can hinder your business progress and effect your business
competitive.
POOR
LOCATION
The
location of the business is not close to transport links or customer bases.
POOR
PRODUCT OR SERVICE
The
product or service being offered is not in demand and hence does not sell or i9s
not bringing you enough return. The
quality of product or service being sold is not of the top grade and hence
people do not buy.
POOR
CASH CONTROL
Profits
are seen as made up as made up in cash and the owner uses this cash too fast
leaving the business with not enough funds to pay taxes and suppliers.
POOR
PRICING OF GOODS
Not
setting profitable prices for the products or services offered.
The prices set are below the right margins and result in nearly breakeven
gains or just losses.
LACK
OF INTERNAL CONTROLS
Lack
of internal controls in the business e.g. controls over cash, security, controls
over employees, checks of stock levels to reveal pilferage etc.
LACK
OF DIVERSIFICATION
A
significant exposure to one market or product which fails, one customer and
loses order, one suppler and that supplier does not supply any more..
THE
BIG ORDER
Big
orders can land the business in trouble for at least three reasons:
