REASONS FOR BUSINESS FAILURES

While no one goes into business to fail, the statistics counter prevailing wisdom.  The 1992 SBA statistics tell us at the end of five years, more than 55% of new businesses fail.  70% are not in business in ten years. You ask how can this be true?  Unfortunately, the answer lies in the beginning of the business.  Too often, owners start a new business believing they have a great idea/product, enough money, and customers will come.  This is hardly the truth.  

When starting a new business there are many factors one needs to take into consideration and make a conscious decision.  (See "So You Want to Start/Buy a Business)  The successful new businesses have many elements in common.  These include: complete financial planning, quality customer demographics, understanding who the customer is and how they buy, defining a customer experience, knowledge of the market, quality financial forecasts, contingency plans, and much, much more.  

One source, Be Excellent®, quotes Entrepreneur Magazine and Yahoo! as to the top reasons for business failure:

1. Lack of direction

2. Impatience

3. Greed

4. Taking action without thinking it through first

5. Poor cost control

6. Poor product quality

7. Bad or nonexistent budgeting

8. Inadequate financial records

9. Loss of momentum in the sales department

10. Failure to anticipate market trends

11. Lack of managerial ability or experience

12. Indecisiveness

13. Bad human relations

14. Diffusion of effort

As a business owner, one needs to take the lessons learned by others and incorporate that knowledge into their business model.  Successful business owners not only work in the business by using good management and leadership skills but they also spend 10% to 15% of their time working ON their business.  Those who work ON their business improve their chances of business success because they are making quality decisions with the future in mind and making informed decisions.