“Why do businesses fail?” is the title of chapter six in my book, Business Fits. Here are some of the highlights from that chapter.
The number one reason businesses and especially new start-ups fail is under-capitalization. If you’re starting a business from scratch everything takes longer and costs more than you expect.
I give an example in the book of how quickly increasing sales in my Ford-Mercury dealership almost broke it. Growth is not always good.
The second leading cause of business failure is the lack of a proven business system. People often start or buy a business with no plan. They think they are going to learn as they go. Think again; It doesn’t work that way.
The new entrepreneur often makes the mistake of getting so excited about his emotional perception of the demand for a product or service that he ignores the business system. The new entrepreneur may also ignore what role they must play in the business to be successful.
Poor management is the third leading cause of failure. Every business must have marketing and management. A business can have the best business system in the industry, but if management doesn’t implement the system, it will fail.
A lot of other factors contribute to a business failing. One of the major reasons is divorce. A divorce can mean dividing assets, which may mean putting the business in a position of under-capitalization. The business may have to be liquidated.
There are many other factors including changes in the market, changes in the competition, a bad location, changes in traffic patterns, economic changes, changes in government regulations and more. Proper planning can prepare for these changes.
Franchise operations fail less often and for different reasons. A good franchisor will not award a franchise to someone who is under-capitalized. A good franchise will have a proven business system, but the franchisee must follow the system. Not following the system is probably the second most frequent reason for a franchise failing. I have seen that the number one reason for a franchise failing is divorce.
All of these issues and many more are covered in my book, Business Fits. http://BusinessFits.com
Please note, I have only addressed private sector businesses. Government and especially our federal government don’t have to operate efficiently or at a profit. Federal agencies are seldom as efficient or productive as the private sector. They have unlimited resources. Historically the federal government just increases the debt and taxes on the working middle class to stay solvent. It is time for a change.
God bless President Trump and guide him to make
great again. America