Top 3 Reasons Why Businesses Fail 
The Top 3 Reasons Why Businesses Fail or Fail to Grow is surely vital information every Business Leader should know, in order that they avoid making the same mistakes others have. Despite the seemingly many complexities of Business there are however only three Reasons that a business will either Fail or Fail to Grow. Every other reason or problem that you may see quoted are simply symptoms of the 3 main reasons. These are the common denominators and understanding this will allow you to take preventative action, to ensure your organization doesn’t fall victim to stalled sales, low margins and the misery this brings.
1) Why Businesses Fail -People
The number one reason Why Businesses Fail is because of People. No one wants to say it, no one wants to admit it and no one wants to talk about it. When I say people, I mean the Owner and/or CEO. If a software programmer decides to start their own business of one person, namely themselves, then no one would surely argue that responsibility for success or failure lies squarely at the door of the programmer, or new CEO as he now is. The responsibility for Success or failure is no different for larger companies. Some would argue that it is more difficult to lead, manage and drive a larger company , but surely the larger company has the benefit of more experience and more resources. People are responsible for Leadership, Strategy, Planning, Sales & Marketing, Customer Service etc, etc. If we are happy to accept responsibility when things go well, then we must also accept responsibility when things do not.
2) Why Businesses Fail – Insufficient Funding
Insufficient money to invest in Sales & Marketing, People and Operations will inevitably make growth difficult. Funding will severely limit any organization, whether as a start up or as an established but growing business. Startups need money, not only to cover running costs but for example investment in Research, New Products, Intellectual Property, Patents, Trademarks all of which often come when the business is pre-revenue. Nearly every Startup simply underestimates how much money they need. Many established businesses have also failed whilst in growth mode. Increases in sales orders can mean near term increases in materials, labor and distribution, which often all have to be paid for before sales revenues are received. This can put a tremendous strain on Cash Flow which ultimately can close the business.
3) Why Businesses Fail – Technology
Technology can both enable and kill businesses simply because it changes so quickly. The PC killed the Typewriter Industry, the Laptop killed the PC industry and Tablet devices are now killing the Laptop industry. The Music industry has experienced huge shifts from 8 tracks, to LP’s, to Audio Cassettes to MP3 files. The Publishing industry has changed dramatically with internet book shops, Ebooks and Kindle devices. The good news is, for every industry technology killed, new industries appeared to supply the new technology. Those companies that embraced new technology have flourished and some have dominated their markets. In non technology based businesses technology is used to increase market reach, increase employee and customer user experiences and drive operational efficiencies that make companies more competitive. Technology is your friend and you need to embrace it, in the same way as every successful company has done.
When examining the reasons Why Businesses Fail, it is really easy for us to spot and blame the symptoms of a failing business such as low sales figures, bad customer services, inadequate financial planning, poor business operations, the competition, the market or the economy. Ultimately however, the root cause of all these are directly linked with deficiencies in people, funding and technology. We must then make sure we are addressing the correct problem or better still, we need to prevent the problems from even arising.
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