Table of Contents
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1 Why Businesses Fail?
- 1.1 Inadequate Front-End Planning
- 1.2 Insufficient Capital for Startup and Back-up
- 1.3 Inexperienced Management
- 1.4 The Wrong Location
- 1.5 Inventory Mismanagement
- 1.6 Too much Capital in Fixed Assets
- 1.7 Poor Credit Practices
- 1.8 Unplanned Expansion
- 1.9 Having Wrong Attitude
- 1.10 Inadequate Records and Financial Knowledge
- 1.11 Lack of Managerial Foresight
- 2 FAQs Section
Why Businesses Fail?
The U.S. Small Business Administration conducted a study that looked at the reasons for small business failure. Here are the major reasons ranked according to frequency:
- Inadequate Front-End Planning
- Insufficient Capital for Startup and Back-up
- Inexperienced Management
- The Wrong Location
- Inventory Mismanagement
- Too much Capital in Fixed Assets
- Poor Credit Practices
- Unplanned Expansion
- Having Wrong Attitude
- Inadequate Records and Financial Knowledge
- Lack of Managerial Foresight
Inadequate Front-End Planning
No business plan was prepared; no feasibility study was done and no cash flow projections were done.
Insufficient Capital for Startup and Back-up
Even most dedicated works cannot overcome ongoing capital deficiencies due to startup losses.
Inexperienced Management
Insufficient experience in the management and the day-to-day operations of the business or of any business.
The Wrong Location
Low traffic, no expansion area, changing characteristics of the neighborhood. The customers are out there, but the business is not convenient because of driving and parking distance, transportation costs, and employee unwillingness to live in the community.
Inventory Mismanagement
Too much of the wrong inventory.
Too much Capital in Fixed Assets
The failure to properly anticipate the cost of equipment and real estate needed to start and expand.
Poor Credit Practices
Failure to properly extend and control credit policy and practices.
Unplanned Expansion
If one location is doing well, a second doesn’t mean the business will do twice as well unless management is available.
Having Wrong Attitude
Not ready to work longer and harder than ever before; too much money in trappings and appearance.
Inadequate Records and Financial Knowledge
Unwillingness to employ and work with a banker, accountant, and lawyer.
Lack of Managerial Foresight
Failing to build staff to compensate for the weaknesses of the founder or owner; failing to adequately compensate second-line management.
FAQs Section
What are the reasons for business failures?
The following are the reasons for business failures:
1. Inadequate Front-End Planning
2. Insufficient Capital for Startup and Back-up
3. Inexperienced Management
4. The Wrong Location
5. Inventory Mismanagement
6. Too much Capital in Fixed Assets
7. Poor Credit Practices
8. Unplanned Expansion
9. Having Wrong Attitude
10. Inadequate Records and Financial Knowledge.
