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    11 Replies Latest reply on Mar 12, 2014 1:10 PM by Moderator Melinda

    Why Are Businesses Failing??

    LUCKIEST Guide

      It seems to me that the economy is improving,

      The stock market is hitting new highs,

      The housing market is also growing,

      and consumer spending (that drives the economy) is strong and vibrant.

       

      So why are businesses failing??

        • Re: Why Are Businesses Failing??
          Guide

          Well Luckiest, there could be many reasons for this. The economy hit everyone very hard. For those of us who saved for a rainy day, some of us may have burned through that reserve causing a bit of a negative situation. Depending on how big of a hole your in, can dictate whether you will make it or not.

           

          The type of business you have can also dictate your failure in this economy. It's the nature of supply and demand. If there are several of the same business in the area, your recovery can take much longer than usual.

           

          What does everyone else think?

           

          Melinda

            • Re: Why Are Businesses Failing??
              amspcs Ranger

              I've seen hundreds if not thousands of businesses fail during my long career in biz-to-biz services.  95% of them for one (sometimes more than one) of the following reasons: 1.)  Lack of funds.  Not enough cash or credit to get the business off the ground. 2.)  Lack of planning/homework.  They didn 't know what they were doing and weren't smart enough to either educate themselves or hire someone with the needed expertise. 3.)  Just not of the personality type to operate a business.  This is not a knock and doesn't mean they are 'bad' people.  It just means that running a business and dealing with the public takes a certain unique personality. Just like some of us are left-handed and others right-handed, some of us can hit a baseball better than others....some of us are better suited to run businesses, and others are better suited to be employees.  Sorry if I'm stepping on some toes, but that's just the way I see it after some 30 years of observation. 4.) Just plain don't know how to operate a business.  I notice when terms come up like "overhead factor", "inventory turnover" etc. etc. and they look at me like I'm speaking sanskrit, I know they're in trouble.

            • Re: Why Are Businesses Failing??
              chicagocio Scout

              I am not suggesting that this is the top reason, but I have found the many business models won't survive unless they keep growing and that means making sure your processes and infrastructure are scalable.  Some small business shops don't handle busy days very well and instead of taking in a lot of extra profit on those days they simply create bad word of mouth that works against them.  Not to mention they weren't able to use those periods to build a cushion for tougher times down the road.  I think business optimization is a discipline and I can't say I see it being practiced everywhere I look.

              • Re: Why Are Businesses Failing??
                AngelBiz Tracker

                Small businesses fail all the time no matter what state the economy is in. I don't think they are falling at a faster rate when compared to 3-4 years ago when we were in deep recession. Having said that there are number of reasons why small businesses fail. amspcs has articulated them very well. Lack of funding is one of the primary reasons for small businesses to fail.

                 

                I had written an in depth article on common cash flow mistakes businesses make and how they can avoid them. Thought it might of interest to some. You can find the article here -http://www.smallbizviewpoints.com/2012/01/03/7-common-mistakes-that-impact-cash-flow-and-how-to-avoid-them/

                  • Re: Why Are Businesses Failing??
                    Guide

                    Angel, I couldn't agree more with your first sentence. One of the biggest surprises that I have experienced in observing and still don't have an answer to, is why some businesses do everything right, they dot every i and cross every t, have a great business plan and have plenty of reserve, etc.....and yet....still fail. Then you have the opposite to be true. I have seen some of the greatest incompetent business owners that left me slapping my head and yet despite the incompetence, still thrive and manage to turn a profit. The only explanation that I have heard is..........it's just the nature of the beast.

                     

                    Melinda

                  • Re: Why Are Businesses Failing??
                    Sandeep Thakur Wayfarer

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                    • Re: Why Are Businesses Failing??
                      ahirai Newbie

                      There are many risk factors that can lead to business failure. Fortunately, there are mitigation techniques you can use once you've identified the various sources of risk. I spent a large part of my early career in the risk management field, and I've applied many of the same principles to startups and small businesses. I wrote an article a few years ago describing a risk management framework - hopefully it will help you find some solutions that are right for your situation: What Kills Startups? - Risk Management for Entrepreneurs

                      • Re: Why Are Businesses Failing??
                        Ryan Viola Scout

                        All points are ok

                        Just include following points

                        • Lake of dedication
                        • Less Hard work
                        • Less logic
                        • Re: Why Are Businesses Failing??
                          kimmy burguess Adventurer

                          Whether you're doing your business online or offline, having your goal is one solid foundation to determine whether you will succeed or fail. Not knowing where you're going will definitely lead you nowhere.

                          Success is never overnight. You have to have patience. You have to give the seeds time to grow and be nurtured properly by the sun.

                          • Re: Why Are Businesses Failing??
                            seoservicepro Ranger

                            Because it's part of the process. If you are an entrepreneur, failure isn't always a bad thing. Companies even like to hire people who have pursued a business idea and failed because they know that person likely learned some valuable lessons.

                             

                            “I have not failed. I've just found 10,000 ways that won't work.”

                            Thomas Edison

                             

                             

                            When a reporter asked him about his many failures, Edison simply said, 'It just meant that I was that many times closer to success.'


                            So, entrepreneurs don't fail, they just keep taking steps until they succeed.

                            • Re: Why Are Businesses Failing??
                              Harry kyin Adventurer

                              Not having an effective sales force to cut down the inventory and release working capital could lead to failure of some businesses. Not ironing the kinks out when the business was in its infancy could also lead to bigger and weightier problems in the future which cannot be resolved. Being highly leveraged is also bad for business. Being in a business which faces certain doom because of a revolutionary product could also sound your death knell.

                              • Re: Why Are Businesses Failing??
                                Guide

                                All very good points. I also believe that many people also make the fatal mistake of assigning personal feelings instead of treating their business just as it is, a business. Many people just don't know when to cut their losses and get out before they lose it all and then some. This I have seen one too many times.