REASONS FOR BUSINESS FAILURES
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:
loses interest, is not motivated.
develops poor relationships with staff, suppliers, bankers, customers and does
not get their full co-operation and relationships
OR NO BUSINESS PLANNING
planning ahead to establish future income, expenses, resource requirements
(staff, equipment, funds required)
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.
having suitable records for all business transactions.
This prevents business managers from making good business decisions.
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Excess stock can also deteriorate or become old and out of date.
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
planning marketing strategies and implementing
marketing objectrives properly, resulting in ineffective advertising,
selling and distributing of goods and services.
everything to staff without any
control or overall surveillance. Employing
more than enough staff or employing untrained or unsuitable staff.
time excessively in some selected areas only at the expense of other areas that
get neglected and give rise to major problems.
KNOWLEDGE OF BUSINESS ENVIRONMENT
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.
Failing to identify your target market due to poor market research. Failing to adapt your product to meet customer needs and wants.
knowing enough about the industry in which one operates.
Not knowing about buying, selling, interacting with customers,
controlling and handling money etc.
STOCK OF TECHNOLOGY
outdated technology can hinder your business progress and effect your business
location of the business is not close to transport links or customer bases.
PRODUCT OR SERVICE
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.
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.
PRICING OF GOODS
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.
OF INTERNAL CONTROLS
of internal controls in the business e.g. controls over cash, security, controls
over employees, checks of stock levels to reveal pilferage etc.
significant exposure to one market or product which fails, one customer and
loses order, one suppler and that supplier does not supply any more..
orders can land the business in trouble for at least three reasons:
You can become too dependent on one major customer.
You can over-extend yourself quite easily and this can wreck your
cashflow. Suddenly you need
extra staff, more machines, but it could be months before you get any return.
In the meantime you still have to pay wages and bills
Itís easy to get so involved in fulfilling a big contract that you
neglect and lose your smaller customers.
And when the big customer decides to order from someone else next time,
where does that leave your business?
who always have an excuse for problems and are not facing up to the situation
and doing something about it, e.g.
Lack of working capital
Bank will not lend me more
Competitor is trying to ruin me
I can not compete with the big competitor
The general economic situation
TO COMPLY WITH REGULATIONS
to comply with tax , other government, local body regulations.
TO TAKE PROFESSIONAL ADVICE
to take professional advice when required, or ignoring professional advice that
TAKING UNNECESSARY RISKS
Poor decisionmaking and taking unecessary risks.
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