Reasons Why Businesses Fail

Deciding to start your own business can be one of the most exciting and rewarding decisions you make in your life. A good % of new businesses fail today. This is largely due to mismanagement, poor planning and knowledge gap.  In today’s business world, succeeding in a new venture can be quite challenging and demands adequate planning. Already existing businesses are not left out. In recent times, we have witnessed large corporations rash out of the market. Why is this so?

 Here are good reasons why most businesses fail:

1.       Faulty Business Plans: As a rule, you should always have a business plan before venturing into any business. Manipulating the business plan for any reason (whether for funding reasons or not) is unacceptable. Poor business research or missing out critical details can also spell the doom of the business even before starting. If your business must survive, then you must get it right from the business plan. Business plans also include strategic planning for an ongoing venture such as expansion plans joint ventures etc.

2.       Poor Marketing Strategy:  Poor marketing strategy could also affect the capacity of the business to effectively analyze and conquer market competitors, understand consumer buying patterns, steer product improvements and technological innovations, effectively advertise, anticipate geographic and demographic markets etc. Finally employ the tool of advertising.

3.       Inadequate Risk Management Strategy: Identify potential pitfalls and learn to avoid them from the word go. Plan every step of the way before you even start. This includes full investment and expense planning as well as business contingency plans. Managing risk is an essential part of any business. Business risks may appear in any facet of the business. Risks and uncertainty are realities every business must face. For instance, these risks could be: Financial Risks, Economic Risks, Production Risks, Human Resource Risks, Legal Risks, Political and Social Risks, Management Risks and Market Risks. Improperly anticipating risks or managing them when they occur will eventually lead to business failure.

4.       Poor Corporate Governance Structure: This includes excessive spending by management, poor judgment calls, shady and illegal dealings, poor hiring, employee selection and management culture, corrupt practices etc.

5.       Bad Customer Service Structure: Every customer is unique with diverse backgrounds, needs, thoughts or expectations. One fact however cuts across all customers:  Customers will continue to patronize you as long as they continue to have good experiences over and over again. The reverse is equally the case. Customers will refuse to patronize you if your business fails to meet their expectations. It’s that simple.

Please note: I have written extensive articles on risk management, customer service and marketing strategy. Please read these articles or purchase any of my courses for extensive details on these subject matters.

By Valentine Okolo