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Top 5 Reasons Why Businesses Fail

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While we never want to focus on negatives in any part of our life, starting or managing a business is the perfect time to do just that.  Why? Because knowing the common reasons that businesses fail, and what you can do to avoid this fate befalling you, puts you in a great position to ensure that yours will remain an unblemished success.

We explored the top five reasons why businesses, both new and old, tend to fail.

Bad Management

How often do we see a report or piece of research that cites mismanagement as the primary reason for business failure? It has become such a regular occurrence that one would think business leaders would have learned from the mistakes of the past.

Although a lack of management skills and nous can often be the reason, incompetence cannot be cited in all instances. Sometimes a management team may have been unable to spot fraud occurring in the business, and at others, they may have just been downright negligent.

It is impossible to put a price on strong, decisive leadership at the top of a business.

Lack of Funds

Whether it is unable to secure credit to purchase stock, as happened recently with Comet in the United Kingdom, or failing to deliver projected revenue incomes, money can be found at the heart of all business failures.

These problems can be avoided by thoroughly planning expenditure and knowing what you need to spend, while also being realistic in terms of sales and profit margins.

Location

You can have the best business idea and the most beautiful office complex in the world, but if you’re at the end of the high street where no-one ever goes, you aren’t going to succeed.

Finding a premium location will create a hole in a business’ finances, but can often be the difference between a handful or hundreds of customers coming through the door.

Overexpansion

Many business manuals today urge smaller companies to ‘think big’ in their operations. Unfortunately, several of these businesses misinterpret the message, and embark on aggressive growth and expansion programs that leaves them either short of money, or unable to meet their obligations to all of their clients, or both.

Expansion should be organic, which will ensure that you are fully equipped to manage growth at every stage of your business’ life.

Poor Internet Presence

Even if you don’t have an online business, there needs to be some sort of web presence that tells customers who you are, what you do, and inspires them to come and find your physical location and do business with you.

Spending the extra money to ensure a professional, clean looking website will go a long way to bringing revenues to your door. A failure to do so will find you looking for something else to do in no time at all.

Keep these reasons in your mind throughout your business’ life, ensure you do not fall into any of these traps, and are able to manage the business successfully for a long time.

Robert is an online content writer across a variety of topics, specializing in areas of business including business turnaround, development, and startup initiatives.
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