The Real Reasons Why Most Companies Fail

BY SUZZANNE UHLAND

The Real Reasons Why Most Companies Fail


It is a know fact that the financial world is a tough environment in which to survive, especially for new and upcoming business ventures. Why do some companies fail and others flourish by means of what seems a rather simply business idea? According to the Small Business Administration, about half of all new businesses are able to survive their first five years while only a third of those survive past the 10 year anniversary.

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https://www.sba.gov/sites/default/files/FAQ_March_2014_0.pdf

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On this article, we will take a look at some of the main reasons why businesses fail and how some of the mistakes their CEOs make, are easily preventable if caught on time and the correct preventive measures are taken into considerations. For more great articles, check out our blog at Suzzanne Uhland Slideshare.

Out of touch with their customers’ needs.Sometimes when entrepreneurs are successful, they settle and then disappear believing that their initial idea is a wave they can ride forever. Customers may love your service or products, but failure to maintain open communication channels can lead to neglecting their feedback and thus wasting a great opportunity to improve upon what you can offer your client base. Companies who are in touch with their customer and react and adapt to their needs are companies that prosper by not forgetting what made them successful in the first place.

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The business doesn’t really bring anything new to the table.

Your business must have something that sets it apart from all the other thousands of people out there who claims to have an innovative idea, and a great product is definitely not enough. Entrepreneurs sometimes fail to ask themselves the tough questions like: What sets up apart from the competition? What are our competitors doing better? Where do we go from here? Building a brand is about differentiation in the market in terms of service and product and it must be one of the core values of your operation.


Failure at the top

Poor management skills can be evident in many ways and the result they will most likely yield is the failure of the business. Arguments amongst the top leadership is one of the signs of leadership failure as well as not having clear goals or an effective way to guide your team towards success. Lack of experience sometimes plays a role in the failure of the mission as well as the inability to make the right decisions when the going gets tough.


Inability to manage finances correctly.

Understanding where the money is coming from is just as important as knowing where is going. Businesses can also fail when they do not have a contingency plan for when things go wrong, because this type of oversight is not realistic nor is responsible. Having hopes and dreams can only get you so far, because if you have no idea how to manage funds, expenses, taxes and cash flow you will be setting yourself up for failure. Being financially educated is just as important as the other aspects of getting an idea off the ground.


Growing too fast

Believe it or not, when a business gets big too soon, it has a lot of trouble keeping up and it may lose its momentum and never recover from it. Being unable to fulfill orders and to keep up with the demand of your customers is a sure way to lose your client base. A lot of times, these type of issues cannot be avoided as ideas may be way better than you originally think, however careful and strategic planning do go a long way when it comes to anticipating the needs and demands of the market.


Some companies do not learn from their mistakes.Having setbacks is part of the game, but if your company cannot roll with the punches and learn from these experiences, it is doomed to failure. Reasons for failure are multiple and failing to recognize these reasons and being oblivious to your own mistakes is probably the worst error a leader can make. Learning from failure takes the positive out of a bad situation and ensures that the same mistakes will not be made twice.

Incorrect inventory.Having too much inventory ties up your money into something that you may not be able to move out of your warehouse while not having enough can lead you to losing your customers for failure to meet the demand. The trick is to find that perfect balance or to have a contingency that will allow you to fill orders quickly as you need it without having to overstock on inventory.


Fraud.Fraud is the quickest path to bankruptcy and failure. Not only can you lose everything for being caught in illegal dealings, but even in the event that what you are doing is not necessary unlawful, it can be enough to make you lose the support of your shareholders and thus take away your core.

Not preparing a business plan.A company without a plan is like a ship that has no way to steer at sea. You may go back and forth depending on the environment around you, but without a focus and a direction, you will not get far.