The causes for business failure

The causes for Business Failure

It is tempting to attribute an increased failure rate solely to the business climate. Inflation, high finance costs, demand slumps and government constraints have all been cited as key factors precipitating business failures.

However, case studies have consistently shown the majority of business failures stem from poor management. Well-managed businesses weather economic storms that would sink a poorly managed business. Companies that demonstrate poor management usually have deeper problems; lack of proper financial information, no business development plan, inadequate product mix or an inability to respond timeously to changes in the business environment. These companies are also inclined to be reactive rather than innovative when confronted with problems.

Remember too that if you intend to withdraw, the time to sell is before the decline is properly perceived. Sell at the top of the market, not the bottom. If the market is already depressed, you are far too late.

“Or what king, going out to wage war against another king, will not sit down first and consider whether he is able with ten thousand to oppose the one who comes against him with twenty thousand? If he cannot, then, while the other is still far away, he sends a delegation and asks for the terms of peace.”

Luke 14.31-32

In the same way, competing effectively in a depressed market presents the ultimate challenge to the corporate leader. The selection of the appropriate strategy, the will to push it through, and the ability to maintain the organization’s belief in itself while doing so, will make the difference between those competitors who exit the marketplace at a loss and those who turn adversity into opportunity.