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Guard against business failure



There are factors that lead to the success as well as the failure of businesses. While one may not want to appear to be a pessimist, it is just as important to highlight the factors that may lead to business failure so that entrepreneurs and business owners may know what to avoid.{{more}} The causes of business failure are varied. The size of the business as well as the strengths of its management would to a great extent determine how successful it is. Business failure is real. In fact many successful entrepreneurs would admit that before they were successful they would have failed several times.

Here are some of the most common causes of business failure. Examine the list carefully and see what steps you can take to ensure that your business stays successful. In your examination, you will notice that many of these are interrelated. In other words one may lead to one or more of the others occurring for e.g. if your staff is untrained they may deliver poor quality customer service or make a poor quality product. Similarly, underestimating costs may lead to instituting an incorrect pricing strategy. Hence, these causes of failure cannot be looked at in isolation.

1. Poor quality/inferior products i.e. goods and services

2. Poor quality customer service

3. Overestimating sales

4. Underestimating costs

5. Failure to control costs

6. Inadequate market research

7. Unwilling to adapt to changes

8. Incorrect pricing strategy

9. Lack of continuous planning

10. Untrained staff

11. Taking competitors for granted

12. Poor cash flow management

13. Insufficient working capital

14. Using the business’ money unwisely and not reinvesting profits into the business

15. Expanding too rapidly without a proper business and strategic plan

16. Ignoring information on the business’ financial position

17. Keeping no or inadequate financial records

18. Granting too much credit without a proper credit management system in place to collect outstanding sums

19. Over-borrowing (overdraft facilities, credit cards etc.)

20. Failure to keep up-to-date with new systems of management

21. Failure to advertise and promote the business and its products adequately

22. Lack of knowledge of products

23. Poor relationships with suppliers for e.g. not paying for goods on time, etc.

24. Inadequate or no insurance on property, equipment and machinery

25. Unwilling to seek professional help

Submitted by the Centre for Enterprise Development Inc. We are located in the Singer Building on Lower Bay Street, Kingstown. Our telephone numbers are 784-451-2235/6. Email or