Why do businesses fail?

Even 96% of firms in the US fail because of the bad management. In the other countries, these factors are significantly more pronounced than in the US, and the owners of small and medium-sized enterprises need to pay particular attention to the “pitfalls” of businesses listed below. There are many reasons for the failure of a business and many studies that are talking about these problems.

1. Problems with cash flow

Cash management is a habit that is acquired at an early age. Are you thinking entrepreneurial effectively the best will tell you the way you manage your own household – if you do not follow a household budget, it’s hard to comply with the budget of the company, which is at your disposal. Therefore, it is important that business decisions are based on the “freshest” information about changes to your financial situation. Ask yourself three times the question “Why?” Before dragging any significant business move.

2. Starting with insufficient capital

Entrepreneurs often underestimate the importance of initial capital and erroneously conclude how much money is needed for the development work and are therefore forced to close it down before they get a real chance to succeed. This is particularly evident in our economy, and with it are mainly unrealistic expectations when it comes to the “flowering” of business and sales.

It is very important, before starting a business, to make sure how much it will require the investment of money, and not just what costs will be at the beginning, but how much it will cost the survival of the business. It should be borne in mind that for many companies had to pass a year or two to “stand on its own feet.” This means that you need sufficient sources of funding which will cover all costs while revenues from sales don’t reach the level where they can settle expenditure.

3. Insufficient research and planning

Careful, methodical and strategic planning is critical to success in business. All who want to start their own business initially hired the consulting firm that will conduct the investigation and assessment of the market, and on the basis of which it will make the foundations of his company. Similar research is later, during the work, which they lead with the business moves.

4. Bad creating of price

This factor is very much present. Prices are formed not by how much the buyer is willing to pay, and the competition to allow, according to the factory or the production cost and the spores that require your business, which is inevitably included. Therefore, many companies fail precisely because their products and services are below the real price.

Another trouble with the market is because it’s still a big part of the monopolized market and prices are formed on the basis of mutual agreement by competitors.

5. Too much optimism regarding the anticipated sale

Many small and medium enterprises selling for anyone and think they have the money and the account that delivered goods is the same as the sold goods. It is in fact, wrong, and so come to a standstill later when they cannot pay their debts. For months’, they ask the creditor to pay them the products he took (and very probably already sold, and the money to cover other expenses) until you decide to block his account, sue him or until his company does not go bankrupt.

So, make strong your sales department, because it’s lifeblood of your business; create the high-quality marketing plan; establish a good relationship with the customers who buy a lot and pay on time; well ask and assess how “voice beats” of each of your potential new clients.

6. Bad delegation of responsibilities

The mismanagement that is placed in the hands of one person causing the collapse of many businesses, especially start-up, because the owners of new businesses often lack not only experience but also expertise in finance, procurement, sales, production, employment and management of staff. If you do not realize you’re doing wrong and do not seek help, could soon be faced with disaster.

A successful manager is also a good leader who creates such a business climate that encourages productivity and accountability among employees. He has the gift to recognize and employing competent people, train them, and they delegate tasks and responsibilities. A good manager is also capable of strategic thinking that vision into reality, to cope with the changes that make the “painless” passes and see the new features that are provided in the future.

7. Unseeing the problem and not seeking help

It is logical that the owner who thinks he is the smartest will not realize he makes mistakes, will not anyone ask for help. Many would rather just disappear, or will wonder what they are not doing well and is it problem them and their management. After all, we are for the failure is always someone else to blame: the government bureaucracy, crisis, transition …

8. Minimizing the importance of promoting

Too many small businesses rely on their track record and reputation, which is good, but that source can dry up. Every day you have to make efforts to speed up the sale, was to invite clients, send emails, write blog posts, or to ask a satisfied client to write down praise on LinkedIn. You must actively put know the business world that you are open for cooperation.

One of the most important aspects of the promotion and marketing of brand advertising online. It is now easier than ever. First, you must have your own website that is well designed and on which the users can easily manage. The percentage of Internet users is growing day by day, and anyone who wants to cooperate with your company, or buy anything from you, will first find on the Internet, and only then will call you. On the basis of your site, people should very easily understand what you are doing and how they can cooperate with you, and then you can offer additional services and benefits. Business online is the imperative of modern business.

9. Lack of business experience

Companies usually fail because their owners do not know how to run a business. On the other hand, 80% of businesses that run successful business people certainly succeed. Their key is in the experience – they know how to successfully lead a business, they know how to sell, negotiate, how well you invest money, to sell their products to market, manage finances …

Successful businessmen know how to choose the right moment to enter a particular market. Thus, in this study states that “entrepreneurs who have chosen a good year and a good industry have a much better chance to succeed in their endeavors coming from those who have succeeded in investing in the property industry – next year“ . Moreover, entrepreneurs who have already proven capital is much more accessible.

10. Hiring the wrong people

Employment “through the” people who are not suitable for a particular position is present even in private firms. Especially in small enterprises is sometimes belief that it will easily do the neighbor’s little boy. The company costs more than that to recruit a competent person and give her adequate wages.

11. Misunderstanding of competition

Misunderstanding of competition, the advantages of its existence and the challenges that need to be overcome to win in the competition, can contribute to the collapse of your business with a 55% chance. The big problem remains as expressed in the market of a lot of countries monopolization and cartelization, is because a business is based on an agreement, rather than on principles of market economy.

12. Reliance on one client

It is important to know that if you do not have an extensive network of partners, you will not be able to survive in the market. After all, it’s cheaper to keep an existing customer than get a new one. Therefore, it is necessary to invest time in building and nurturing their professional relationship. For this purpose, it is necessary to have a detailed database of each client and developed email marketing, which will regularly communicate with customers to know that they can count on you and all the ways they can work together with your company.

 

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