Business failure, avoidance strategies.

Business failure is all too common.

Business failure is all too common, particularly for new businesses or businesses that have become complacent. It can happen to anyone. The business failure rate has been fairly constant for a long time, around 70% to 80% in the first year. Only about half of those who survive the first year will remain in business for the next five years.

Only 10% of these failed businesses close involuntarily due to bankruptcy. The remaining 90% are closed because the company is unsuccessful, does not provide the desired income, or does too much work for its efforts. While this post deals specifically with business failures, the failure of people and managers must be considered. People run businesses, and people are not machines.

It might sound funny, but the most incredible luxury you have is the time from the idea’s inception to when the business is operating profitably. This is the time to research, plan, analyse and be sure of your readiness to build a sustainable business.

Instead of jumping in the deep end and hoping for the best, take time out to think and reflect on what you are proposing. Once you jump in, you will be occupied with operational issues to properly do the research and planning job. Sometimes, there are no answers, but hopefully, this post will give you some early warning signs that may save your business from insolvency.

Funding is not the only answer.

A business that is not profitable may survive with injections of funds, but eventually, those funds have to run out. Some companies do not have a large enough profitable market. Others don’t have an appropriate business model to survive, regardless of actions taken or capital invested.

While some of the best-prepared and best-planned businesses still fail. Understanding the reasons for failure can help assess the overall success potential of your business. In planning against business failure, be honest and objective. Know yourself and your limitations and be prepared to manage the business risks.

There are many ways to achieve business success, including education, studying the success of others, identifying business role models, and networking with other business professionals. You will avoid a business failure when you grow and push yourself to do something you didn’t think possible.

Some conclude that a business failure occurs only when a business goes into bankruptcy. At the same time, others contend that numerous forms of ‘organisational death’ exist, including a merger or acquisition. Others argue that failure occurs if the business fails to meet its responsibilities to the stakeholders.

Still, others say the test is that you can’t pay your accounts as they fall due, which is reasonably familiar with most businesses in the cold, hard light of day. Understand the reasons for business failure. 

Quotable quotes

“Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time”. Thomas Edison

“Failure isn’t fatal, but failure to change might be”. John Wooden

“While failures might hurt, not learning from them will hurt you more”. Peter Sergeant

“To succeed in life, you need three things:  A backbone, a wishbone and a funny bone”.  Reba McEntire

“Don’t seek security; seek adventure. It’s better to live 30 years full of adventure than a hundred years safe in the corner”. Jim Rohn

“I have learned much from my successes, but not nearly as much as my mistakes and failures”. Peter Sergeant