Why Businesses Fail
 
Two Major Reasons Why Businesses Fail
 
There are some businesses that don't do well. Why is it that over 90% of businesses fail? What's the rationale behind it?
 
The first major reason why most businesses fail is because most businesses are not started by entrepreneurs but by technicians thinking they are entrepreneurs. And this is quoted by this person called Michael Gerber who wrote this book called The E Myth.

And what he says is really true.
 
He says that the fatal assumption people have is if you know how to make the technical product of a business, then you know how to run a business that makes the technical product.
 
That's a fatal assumption.
 
What does that mean?
 
A lot of people assume that if I can cook, I can run a restaurant. If I can train, I can run a training company. If I can style hair, I can run a hair salon.
 
I am sorry, you can't.
 
It's totally different.

The hair stylist who goes to start a hair salon, she was good at what she was doing, she was cutting hair. But when she starts a hair salon, she sucks. She's a hair stylist.
 
She can't market, she can't sell, she doesn't know accounting, she doesn't know how to set up business system, she can't lead a team and that's why the business collapse.
 
So that's the first reason why they fail.
 
So if you are a technician right now, or if you are a hairstylist, what do you do?
 
What these groups of people should do is to learn how to run a business, learn marketing, and learn finance. Or find a partner or partners that can add on to the skill sets you need.
 
Second reason why people fail is because of, product sameness, a lack of a Unique Selling Point or USP.
 
Most people, when they start a company, you ask them. So what makes you different?
 
And they can't answer that question.
 
And even if they do answer that question, there's a lot of fluff, oh we are different because we can do it better but how, they can't tell you.
 
And sameness kills.
 
For example, let's say you are in the food business and you start a chicken rice stall, there are hundreds of them around.
 
You know what happens at the end of the day? You have to compete on price. And when you compete on price, your margins get slashed and you end up making no money.
 
You start a hair salon. There's another hair salon down the street, what makes you different?
 
You start a tuition center? There are hundreds around, what makes you different?
 
So never start a business unless you got a USP, you are sure that it's different from the rest of the people.
 
These are the two reasons why businesses fail.
 
Now that you are aware of these two reasons, you will be able to plan, steer and manage your business in a manner that would increase your chances of your business being more successful and profitable.
 
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Ten OTHER Reasons Why Businesses Fail
 
Starting a business from scratch is not easy.
 
In fact, over 50% of small businesses fail in the first year and 95% fail within the first five years.
 
Why? What goes wrong?
 
Below are the common pitfalls to be aware of and plan to avoid.
 
Poor marketing:
Successful businesses are ones that understand and meet the requirements of their customers - you must know who your client is.
 
Learn the basics of marketing and make sure that you track the success or failure of each marketing technique you use, then dump those that aren't working.
 
Make certain your marketing strategy sets you apart so a customer can clearly see why they would rather go to you than a competitor.
 
Cash flow problems:
Many businesses struggle through poor cash flow management.
 
You need to be able to live for one to two years without income when getting started; often businesses are very slow to get off the ground.
 
Also, you have to create and use a realistic business budget, and not constantly drain the business income on personal spending.
 
Tight control and monitoring is essential.
 
Cash flow problems:
A business plan should cover aspects such as marketing, finance, sales and promotional plans, as well as detailed breakdowns of costs and profit predictions.
 
Many business owners think that dedication and hard work will pull them through.
 
A global look at the business, frequently updated, is essential to assure success.
 
If the skills are not present to prepare one, no other allocation would be as effective as obtaining professional assistance.
 
Maintaining poor books and records:
This results in having no conception of profits, costs, margins, sales or customer ratios.
 
The business owner is then unable to make intelligent decisions because of the lack of this information.
 
Good planning means that you've looked at all the aspects of your business and are prepared to handle problems when they arise. 
 
Your business plan helps you to focus on your goals and your vision, as well as setting out plans to accomplishing them.
 
Lack of finance:
Insufficient finance often means that businesses are unable to take opportunities available to them, or have to compromise. Going for high cost solutions to problems, rather than lower cost ones that would yield greater competitive advantage.
 
Failure to embrace new technologies and new developments:
In a fast changing world leading businesses are ones that make best use of advanced modern technologies in an appropriate way.
 
That allows them to work more efficiently
 
Poor choice of location:
Location is a very important business decision.
 
A good location is one that appeals to large numbers of customers, while at the same time minimizing costs.
 
If your business runs out of commercial space, you need to make sure that you are convenient to your customers, and near to your suppliers and your employees, with good easy communication routes.
 
Poor management:
Weak and inexperienced management is one of the major causes of business failure.
 
Managers have to lead a team to be motivated and accountable.
 
Poor human resource relations:
Successful businesses motivate their employees to work hard to help the business succeed.
 
Failing to develop an orientation system for new employees or to follow through on personnel development to foster a team spirit.  
 
Conversely, many owners are unable to swiftly discharge poor performers without fear or favour.
 
Lack of clear objectives:
Successful organizations have clearly focused and communicated objectives that enable everyone in the organisation to pull in the same direction.
 
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Two Major Reasons Why Businesses Fail - Adam Khoo is an entrepreneur, best-selling author and a self-made millionaire by the age of 26. Discover his million dollar secrets and claim your FREE bonus CD '6 Ways To Achieve Anything In Life' at Paving The Way To The Top. Article Source: http://EzineArticles.com/?expert=Adam_Khoo
Ten OTHER Reasons Why Businesses Fail - 0800 781 0414 patrick@effectivebusiness.info http://www.effectivebusiness.info/ Article Source: http://EzineArticles.com/?expert=Pat_Lee