Businesses – May 2012

Why businesses fail?

It is difficult to create, and maintain a business; however, in times of global economic crisis or favorable conditions businesses fail. The first thing to do is take responsibility, because, if we know that we are responsible for customers not buying from us, this means that we can improve, and can find a solution.

Here I present the top five reasons why companies often fail:

1.         Lack of planning and experience.

To create, and manage a business is not easy. Many times we have planned mentally, but with the passage of time we forget our main objectives and goals, so it is very necessary to translate our ideas through a business plan.

The lack of experience also results in too optimistic and unrealistic projections, in rush decisions, etc. Experience is acquired over time, and knowledge of the theory is needed to run a business. If you do not have much experience, it is advisable to start with a small business, assuming some risk, and making decisions without fear of making mistakes or failing.

2. Lack of available capital.

This problem arises when not planning a budget of expenditures. Often times you do not get the expected sales or the company grows too quickly, and does not have enough capital to maintain itself. As mentioned in the previous section, to confront this problem, we must develop a business plan that allows us to project both the revenue and spending, which in turn allows us to make a projection of both income and expenditures, and tells us the necessary amount of capital needed to start a business.

Another solution is to minimize costs without sacrificing the quality of the product or service.

3. Low Sales.

The reasons for low sales may vary. They may be caused by bad location, the market segment, or perhaps an inferior quality product or service is being offered.  Bad customer service can also be a factor.

The main way to combat the problem is to improve product quality, provide good customer service, promote what you are selling and increase advertising. If location is the hindrance, then you should seek a better place, consider alternatives, and contemplate factors such as: target audience, competition, the influx of people, costs, accessibility, and visibility.

4. Poor Marketing.

Simply put. If your company does not have a good marketing strategy, it will never get the results you want. You can have the best product in the world, but if nobody knows about it, nobody will buy it. It’s necessary so that people may buy your product, and want to do business with you that they get to know you, where you are located, what you sell, what you have to offer that others do not offer, and why they should choose you. This is what Marketing is all about.

From my experience, the majority of small and medium-sized businesses dedicate few resources to marketing. And generally when businesses use marketing strategies, they use the same promotional techniques like those of its competitors. I, therefore, recommend a good analysis and use of resources whether it be either traditional resources (newspaper, radio and television) or online resources (website, email, social networks, etc).

5. Excessive competition.

It is essential to get to know the customer in order to find competitive advantages, which differentiate us from other companies. The main ways to deal with competitors is to offer a quality product, which is unique, original, and innovative, and to provide excellent service and customer support.

I welcome your comments and suggestions at

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