Why Business Fail?

As we see some business making mega success every year some Businesses fail because of the lack of short-term and long-term planning. Leadership failure – Businesses fail because of poor leadership, and management. As market trends emerge rapidly, Companies and businesses need to adopt. If leaders fail to adopt and refuse consistent change, there is chance of slow growth or even failure. There are many other factors. The leadership must be able to make the right decisions most of the time. That is the key.

Most of the time leaders focus on one crucial point, a unique product or service. It is not enough to have a great product. You also have to develop a unique value proposition, without you will get lost among the competition. There is too much competition in modern business world. What sets your business apart from the competition? What makes your business unique? It is important that you understand what your competitors do better than you. If fail to differentiate, you will fail to build a brand. A brand is a connection between you and your customer, how much value you put on to it.

You need to understand your customers need. Why they buy from you? Every business will tell you that the customer is most valuable factor you keep in mind. But only a small percentage acts that way. Businesses that fail lose touch with their customers. Keep an eye on the trending values of your customers. Find out if they still love your products. What is the value for customers? Do they want new features? What are they saying? Are you listening? Are you ready for change? When I talk to business leaders, sometimes I receive a response like we don’t respond to negative reviews because they are unimportant. What? Are you kidding me? Are you serious about your business?

Another main factor our Inability to learn from failure – We all know that failure is usually bad, it cause disappointment and stress. yet it is rare that businesses learn from failure. Realistically, businesses that fail, fail for multiple reasons. Often entrepreneurs are oblivious about their mistakes. Learning from failures is difficult. Once you recognise your mistakes you may change and fix your problems. But if you deny your failures than there is no chance of correction.

Bad or Poor management – Examples of poor management are an inability to listen, You can not be a good leader or successful speaker, if you are not good listener. Micro-managing AKA lack of trust, working without standard or systems, poor communication, and lack of feedback. The most important factor is a system in every business. The business with out a system most likely to fail.

Funds are bloodline of every business. Lack of capital – It can lead to the inability to attract investors. Lack of capital is an alarming sign. It plays vital role in business. It shows that a business might not be able to pay its bills, loan, and other financial commitments. Lack of capital makes it difficult to grow the business and it may jeopardize day-to-day operations. It may lead to complete failure.

All business wants to grow and make profit. Sometimes, Premature scaling – Scaling is a good thing if it is done at the right time. To put it simply, if you scale your business prematurely, you will destroy it. If you do not have tools to support growth you may fail. For example, you could be hiring too many people too quickly, or spending too much to acquire new building or spend too much on marketing. Don’t scale your business unless you are ready. You have clear plan how to do it and when to do it. Few chain stores failed because they tried to grow too fast. They opened nationwide warehouses too soon, and it broke them. Even the great brand equity that they have built couldn’t save them. Within a few months, their stock went from high to low. It creates panic in the public and business ca not sustain.

It is really important to pick great business sector to operate in. Choosing a business that isn't very profitable. Even though you generate lots of activity, the profits never materialize to the extent necessary to sustain an on-going company. High volume of sales does not mean business can generate lots of profit. In similar sector a business can lose money even with great sales share due to other factors, wages bill, tax bill, rent, or other expenses. 

Most of the time you miscalculate required funds to run the business. Inadequate cash reserves. If you don't have enough cash to carry you through the first six months or so before the business starts making money, your prospects for Success are not good. Or you learn innovative ways to manage your cash, free bank overdraft etc. Consider both business and personal living expenses when determining how much cash you will need. And how you are going to manage the cash. Failure to adequately anticipate cash flow. When you are just starting out, suppliers require quick payment for inventory (sometimes even COD). If you sell your products on credit, the time between making the sale and getting paid can be months. This two-way tug at your cash can pull you down if you fail to plan for it. Whether you're starting a business or expanding one, sufficient ready capital is essential. It is not, however, enough to simply have sufficient financing; knowledge and planning are required to manage it well. These qualities ensure that entrepreneurs avoid common mistakes like securing the wrong type of financing, miscalculating the amount required, or underestimating the cost of borrowing money.

You fail to approach your customers. Failure to clearly define and understand your market, your customers, and your customers' buying habits. What they want, when they want, how they want. What vale you can add? Who are your customers? You should be able to clearly identify them in one or two sentences. How are you going to reach them? Is your product or service seasonal? What will you do in the off-season? How loyal are your potential customers to their current supplier? Do customers keep coming back or do they just purchase from you one time? Does it take a long time to close a sale or are your customers more driven by impulse buying? What can be done to improve it?

How much you charge for your product or service? Is it fair value for our customers? Failure to price your product or service correctly. You must clearly define your pricing strategy. You can be the cheapest or you can be the best, but if you try to do both, you'll fail. Overdependence on a single customer. At first, it looks great. But then you realize you are at their mercy. Whenever you have one customer so big that losing them would mean closing up shop, watch out. Having a large base of small customers is much preferred. You need a plan B. More diversify customers.

Change is a natural process. Failure to anticipate or react to competition, technology, or other changes in the marketplace. Change is a life, you need consistent change to survive. It is dangerous to assume that what you have done in the past will always work. Challenge the factors that led to your Success. Do you still do things the same way despite new market demands and changing times? Are you ready to adopt change? What is your competition doing differently? What new technology is available? Be open to new ideas. Experiment. Those who fail to do this end up becoming pawns to those who do. It is vital for every business.

Leadership and how you manage your business? Overgeneralization. Trying to do everything for everyone is a sure road to ruin. Spreading yourself too thin diminishes quality. The market pays excellent rewards for excellent results, average rewards for average results, and below average rewards for below average results. There must be clear plan and management structure.

You need to manage can control your growth. Uncontrolled growth. Slow and steady wins every time. Dependable, predictable growth is vastly superior to spurts and jumps in volume. It's hard to believe that too much business can destroy you, but the textbooks are full of case studies. Going after all the business you can get drains your cash and actually reduces overall profitability. You will not expect how soon you can lose all the money. You may incur significant up-front costs to finance large inventories to meet new customer demand. A new premises or refurbishment. Don't leverage yourself so far that if the economy stumbles, Any market condition changes. you'll be unable to pay back your loans. When you go after it all, you usually become less selective about customers and products, both of which drain profits from your company. And end result will be failure.

It’s great to be positive and believe in yourself. But believing you can do everything yourself. One of the biggest challenges for entrepreneurs is to let go. Let go of the attitude that you must have hands-on control of all aspects of your business. Let go of the belief that only you can make decisions. Sometimes you sit back and let it go. Concentrate on the most important problems or issues facing your company. Just focus on the end goal. Let others help you out. Give your people responsibility and authority.

If your management team not capable or professional than it’s a self-destructive situation putting up with inadequate management. A common problem faced by Successful companies is growing beyond management resources or skills. As the company grows, you may surpass certain individuals' ability to manage and plan. You do not need to hire people you know or your friends, you need capable professional people. If a change becomes necessary, don't lower your standards just to fill vacant positions or to accommodate someone within your organization. Decide on the skills necessary for the position and insist the individual has them.

Leader is most important in any business. So, the founder's attitude, ability to be objective, willingness to bring in needed help, and share power are all crucial to success. "Most start-ups make the mistake of falling in love with their product or service," rather than what is markets demand? "Ultimately, it is this lack of self-criticism that causes many companies, start-ups and their more mature counterparts, to fail. Start-ups suffer this fate more often because there are more dreamers than doers." You must be realistic and do not fall in love your dream, fall in love with the deal.  "I would say that the primary reason for failure of start-ups within three years is usually management's failure to act, or management's failure to react, or management's failure to plan or management failure to adopt"

Other reasons why businesses fail in their early years include: poor business location, poor customer service, No manual training system, unqualified/untrained employees, fraud, lack of a proper business plan, and failure to seek outside professional advice. While poor management is cited most frequently as the reason businesses fail, inadequate or ill-timed financing is a close second. It can be make or break. Positive attitude is great but you need to be realistic otherwise business may fail. And it cost money to learn failure through business.