The common reasons why businesses fail have been written about in many articles. They often note common and widespread problems that without a doubt, lead to failure.
The ten frequent causes (in no particular order) may include:
• Bad location
• Bad management
• Expanding too quickly
• Failure to keep overhead costs low
• Inability to adapt to a changing marketplace
• Inadequate funding
• Insufficient marketing or promotion
• Lack of a well thought-out business plan
• Poor execution
• Underestimating competitors
6 reasons why a business might fail:
1) Concentrating on Short-Term Profits and Not Building Long-Term Value
Repeat business is much more valuable than short-term profits. If you lessen the value of the product or service you are selling just to lower costs you may also lessen the quality and lose business. It’s important to get new customers and retain them. Take into consideration the lifetime value of a customer – that’s what matters in the long run.
2) Personal Interest vs. Business Opportunity
The basis of a good business opportunity is one that fills a need in the marketplace — and does it well. Sadly, too many businesses are started only to fulfill an entrepreneur’s self-worth. What you think is fun or interesting or necessary will only work as a business if there is a demand for it in the marketplace. If you build it—they may come, but will they purchase your goods or services and give you repeat sales? If the foundation of your business is to satisfy only your self-interest, then you are missing the point.
3) Life Interruptions
Many entrepreneurial ventures are dependent, to a large extent, on creative thinking and new ideas. If the business owner is distracted and unfocused business can suffer. Unfortunately many of life’s events can disrupt a person’s home life and mindset. Family relationships are fertile grounds for distress, from marital or children relationship problems, divorce, sickness and death are just a few of the many occurrences that can cloud the mind with stress and anxiety and obscure clear thinking and the ability to pay attention. An entrepreneur needs to be able to handle the numerous daily tasks of running a business despite some of the challenges that come with the big picture of life.
4) Poor Feedback and Half-Truths
Our friends and family want to offer unconditional love and support, but when it comes to business, they don’t always give the best advice. When the people closest to us simply tell us what we want to hear, they may actually be doing a budding entrepreneur a disservice. No one wants to say an idea is bad or anything negative. Rarely will you get honest or objective business advice from friends or family members but unfortunately, these are the first people many entrepreneurs will turn to for advice.
5) The Disagreeable Owner
If you are a business owner that people can’t get along with – the problem may not be everyone else. The problem may be you. Do you demand perfection and yell if things don’t go your way? Do you find yourself constantly complaining and annoyed?
As a business owner, if you’re not happy, rarely will anyone else be. This includes your employees, customers, partners, suppliers, and clients. An atmosphere of professionalism and mutual respect will make workplace productive and a place where people want to be. Owners need to lead by example and create a great working environment or risk business failure.
6) Not Fully Committed to the Business
If you are not totally committed to your business, your chances for success will be greatly diminished. In most new business attempts, the entrepreneur must decide that failure is not an option, and put every effort into the demands of making your business succeed. If you keep in mind how much you have to lose, as often as how much there is to be gained, you will have a better entrepreneurial attitude about your business and have a greater chance of it succeeding.