Business failure, avoidance strategies

Wrong strategies lead to business failure.

Business failure is all too common

Business failure is all too common, particularly for new businesses, or businesses that have become complacent and can happen to anyone. The rate of business failure 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.

Of these failed businesses only 10% of them close involuntarily due to bankruptcy. The remaining 90% close because the business was not successful, did not provide the level of income desired or, was too much work for their efforts. While this post deals specifically with business failures, the failure of people and managers must be taken into account. Business is run by people and people are not machines.

It might sound funny but, the greatest luxury you have is the time from the inception of the idea to when the business is operating profitably. This is the time to do your 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 your time will be taken up with operational issues, to do the research and planning job properly. 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 businesses simply do not have a large enough profitable market. Others don’t have an appropriate business model to survive, regardless of any actions taken or capital invested.

Business decisions are made in order to start the recovery process. The people involved have to admit that there is a problem, make some tough decisions, and be willing to take corrective action. Timing is usually critical. Those who make the timely tough decisions will generally achieve a much better outcome for themselves and their families.

While some of the best prepared and best-planned businesses still fail. An understanding of 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 really manage the business risks.

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

Some conclude that a business failure occurs only when a business goes into bankruptcy. While others contend that there are numerous forms of ‘organisational death’, 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 common with most businesses in the cold hard light of day.

Key reasons businesses failure occurs 


There will be reasons for a pending failure, with consequences you will want to avoid.

The following will help you to identify potential problems when appraising a business or a new business opportunity. Become the disruptor not the disrupted.  If you want to make a big difference to your business.

It is easier and sometimes better to make a 1% improvement to 100 things, rather than to make a 100% improvement in just one business activity.

This is quite an extensive list of things that can cause a business to fail. The ideas expressed here are not in any particular order. And not all things apply to all businesses at the same time. Remember business failure is commonly a result of giving up too soon.

You start your business for the wrong reasons

So you’re considering getting into your own business. That’s great! This could change your life forever and help you live the lifestyle you’ve always wanted. Being in your own business can truly be an enriching experience; just make sure you’re doing it for the right reasons. Would the sole reason you would be starting your own business be that you would want to make a lot of money?

Do you think that if you had your own business that you’d have more time with your family? Or maybe that you wouldn’t have to answer to anyone else; if so, you’d better think again. From startup to maturity, heed the warning signs, A lot of people like the idea of being self-employed. But sometimes this attraction is based on incorrect perceptions.

Are your reasons for starting any of the following?

  • “I want to be my own boss”. When you start your own business, certainly you’ll be your own boss. But this means that you’ll be responsible for every aspect of the business. Do you really want that much responsibility?
  • “I get along with and can deal with all different types of individuals, so I probably have most of the skills that I need”.
  • “But I want to work fewer hours”. Many people think that in their own business they’ll be able to control their own working hours and that this means they’ll be able to work less. This is rarely true. Most business owners work at least 50 hours a week.
  • “There’s a gap in the market that my product/service can fill”. If your industry knowledge has led you to this conclusion and you’ve done some thorough market research to confirm your belief. You probably have a good reason to consider going into business.
  • “I am confident at taking charge when a creative or intelligent solution is needed, especially under pressure with strict time constraints”. Keep in mind that it is easy to be confident when you are using other people’s money.
  • “Yes, I have the skills I need to run the business I want. I know my stuff”. While you may have the technical skills to be a good butcher, baker or candlestick maker, which is important but only half the equation. You need to have management, marketing, financial and other business skills as well. Never ever assume that you are a good manager or entrepreneur simple because you have the technical skills required.

Give yourself a better chance

Going into business for the wrong reasons can be fatal and can bring ruin into your family, financial and professional life, particularly in times of drought and adversity.

Should you have to go bankrupt after exploring all your options, then its not the end of the world. Just move forward with the experience you now have. If you start your business for the following reasons, you’ll have a better chance of avoiding business failure:

  • Make sure you have a passion and love for what you’ll be doing and your strengths are up to the challenges.
  • You strongly believe, based on educated study and investigation, that your product or service will fulfil a real need in the marketplace.
  • Physically fitness is maintained and possesses the needed mental stamina to withstand potential challenges.
  • You have the drive, determination, patience and a positive attitude. When others throw in the towel, you are more determined than ever.
  • Failures don’t defeat you. You learn from your mistakes, and use these lessons to succeed the next time around.

There is no entrepreneurship involved

A business that does not have an entrepreneur involved in the business, or at least closely advising the business, it is at risk. Entrepreneurship is not the same as running a business. Without an understanding of entrepreneurship a business, or any organisation irrespective of size, is at risk. A person in the role is often characterised as an innovative, optimistic, creative, independent and hard-working decision maker.

Their behaviour is quite different from most people. Entrepreneurs are more likely to solve problems associated with business failure. Entrepreneurship makes things work,


Failure to seek good advice

An often overlooked cause of business failure is the reluctance of the people involved to seek help and support. This is more likely during the establishment phase. It is just like when we feel our health is not right, we seem to have this fear about finding out what is really wrong. You might be really good at managing a team of four or five people. but the skills required to manage 20 people is entirely different, and 100 people very different again.

Most times there is always an answer and a simple cure readily available.  It is far better to “nip a problem in the bud” when they are easier to fix. How often do we hear the expression “I am sorry but I am afraid that you have left it too late” or, “I wish you had come to see me sooner”?  Think about what Abraham Maslow once said, “If the only tool you have is a hammer, you tend to see every problem as a nail”. Remove your frustrations with good advice,

There is no sense of purpose or a clear direction

The business and its people with no direction can cause everyone to waste time, money and other resources. A business without direction keeps doing the same old things over and over again and that includes making the same mistakes. A business without a purpose or direction is like a ship without a rudder. A torch without batteries willing but powerless, or a symphony without a conductor lots of talent but no good music.

A business with a purpose and direction can overcome many of the problems that can cause failure. What is the one breakthrough that will change the way business is done in your industry, that you can work toward implementing as a competitive advantage? Direction improves business outcomes,

Poor, or no planning

Success is the development of your passion, management expertise and commitment to good planning. Unprofitable businesses lack written goals and clearly defined policies and objectives whereas successful businesses have such a direction. It is critical for a business to prepare and stick to a comprehensive business plan consisting of management, marketing, relationships, business operations and financial components.

There are essential strategies and actions that every business should focus on. People who avoid business failure are consistently willing to use their failures and mistakes as valuable lessons of what not to do in their planning next time. Unplanned growth can transform a successful business into an unsuccessful one.

By not having properly considered and planned for expansion, a business can be caught unprepared. Often leaving the business with dwindling and critically tight cash reserves.

A lack of passion can be devastating. So use your passion as a starting point, Perhaps a one-page Business Plan will crystallise your thoughts,

If the task of creating a Business Plan is daunting, or you have difficulty finding the time to put into planning, the ‘one-page plan’ could be your answer? Are you frustrated with the outcomes of your previous business planning efforts? Don’t worry you are not alone, you never went into business to write business plans.

The real value of creating a business plan is not in having the finished document

The real value lies in researching and thinking about your business in a systematic and more positive way. Helping you to find the answers you want and needs. Planning helps you to think things through thoroughly. Study and research if you are not sure of the facts, and look at your ideas critically. It takes time now but avoids costly, perhaps a disastrous, outcomes later. The one-page plan is a simpler way to get started.

A one-page plan will kick-start the appropriate actions you need to take irrespective of the size of the business. The one-page plan, which I sometimes call the ‘planning by 3’s tool’, will help you to quickly become focused on what is really important. If you try to move forward without direction, both you, your employees and your business will continue to struggle.

While there are many websites that offer to design a plan for recovery, it is not recommended. This should be your plan and not conceived by someone who does not know you or, shares your vision for the business. Don’t hesitate to seek advice and objectivity by all means. But you need to make the plan yours. If you don’t then the chances of the plan being of any value diminish sharply. The real value is in the time invested in the planning process, not the final document.

Lack of intellectual capital and innovation can cause business failure

“We were forced to close because the bank would not lend us the money we need”. Phrases like this have been heard far too many times, but businesses don’t fail due to a lack of financial capital. They fail due to a lack of Intellectual Capital and lack of innovation. Every business will need to face a reckoning on their accumulation if data, information and knowledge and the way they use it.

By giving the business a careful analysis you may find new and innovative approaches. Approaches to fixing the problems you have encountered on the way to your achieving your goals and dreams. Take away the luck by arming yourself with information, knowledge and experience and build a successful and sustainable business. Knowledge management unlocks potential,

Inability to create a profitable business model with reliable revenue streams

The business model is the sum total of all the parts of the business.  If the model doesn’t deliver profitable growth and sustainability the business will fail to live up to your expectations. If the model doesn’t work well all day, every day delivering a positive return, then failure is inevitable. Automation will mean that everyone’s job is going to change.

There’s not much security in relying solely on one source of income. Did you know that the average millionaire has seven streams of income? Your business model must work well,

Not marketing well enough or no real differentiation

The business failure is caused by the simple fact that it is not really in touch with its customers. They gradually fall off and go elsewhere, because of a failure to communicate a value proposition that is clear, concise and compelling. Technologies will help businesses succeed in the future where every business and marketing practice is being rewritten and transformed by software.

While not as obvious as financial problems, failure to address marketing issues can be just as fatal and is often at the core of a business failure. Some keep continually trying to find new customers without taking care of existing customers. The business eventually wears out from the constant grind of finding new customers. Lack of market awareness and a poor understanding of the market you operate in will lead your business to a slow agonising business failure.

Know just what is going on, as your competitors surely will. You need to make your presence felt early on in the buying process of your customers. Use a content audit to focus your business and your marketing messages,

Poor management and governance

Many a report on business failures cites poor management as the number one reason for failure. New business owners frequently lack relevant business and management expertise across many of the business function. Opening a business requires more than the desire to be in business. It also requires the possession or practical business skills including the ability to implement and make things happen.

Unfortunately, many seem to discount the value of business knowledge and practical experience to avoid business failure. Without prior experience, training or education, the new owner is normally ill-equipped to manage a business. Reality checks build better futures,

Inability to balance business and family

It is helpful to understand the conditions that lead to healthy and unhealthy family businesses. Work/life balance is an important issue. Each family business has certain strengths and weaknesses. Indeed, the uniqueness of family businesses is best understood by examining their strengths and weaknesses.

Whether a particular dimension of a family business is a strength or a weakness depends on the degree of which the boundaries between the family and the business are managed and the degree to which adaptability and learning are inhibited or encouraged by the family members. Why are you doing what you do,

Insufficient capital

A common fatal mistake for many is having insufficient operating funds or working capital. Business owners underestimate how much money is needed and they have a business failure on their hands before they even have had a fair chance to succeed. They may also have an unrealistic expectation of incoming revenues from sales. This can positively and negatively impact on capital requirements.

Of course, times of drought and floods can put unexpected pressures on cash flow and capital reserves.

The ability to control costs contributes to many business failures. Excessive spending inevitably leads to financial problems. Working capital concentrated in only one or two areas of the business, starving vital areas of the business will cause business failure. Over capitalised in the wrong areas of the business to meet the shifts in the market may be effective, but only for a short time.

Lack of financial responsibility and awareness along with over-reliance on borrowings can lead to a business failure. Over gearing of your resources puts you further into the hands of your creditors, making it easy to lose control. Become financially savvy,

Surviving a major personal health crisis

Every year thousands of people become terrified because of a major personal health crisis. A medical condition that will seriously affect their families, their retirement, their careers and possibly cause business failure. It starts when they hear those dreaded words, “cancer, heart attack, or car accident”. The good news is that these days many people beat the diseases and recover from car accidents.

But when the treatment has concluded the person’s life has changed, their vision has changed as have their priorities. Sometimes their personal and business relationships can disintegrate for no apparent reason following a major health crisis. Health issues and their impact on business failure is becoming a hot topic in business circles,

Signs of a pending business failure

Negative cash flow is a sure sign of a pending business failure 

There must be sufficient cash reserves to carry the day-to-day operations, a downturn in sales, or a crisis. Cash flows need to be managed otherwise it has a bad habit of drying up, just when you need it most. A cash flow problem is usually only a symptom of another problem in the business.

  • Poor profit margins.
  • There are too many specials being offered.
  • Too many overdue debtors
  • Inventory is out of control.
  • Overspending on capital equipment.
  • Poor control of expenses.
  • Not enough sales to cover the overheads.

If any single term can define what it is that makes or breaks a business, it must surely be ‘cash flow’. Despite having the best product, give the greatest service, have the best people and the greatest investors. If you have a bad cash flow constraint you are heading for a business failure.

Excessive deadstock or slow-moving inventories

The inventory that you hold can age very quickly given today’s fast-paced product development. At Hewlett Packard, more than 80% of their income comes from products less than two years old. At 3M 30% of all sales from 50,000 different products, are from products introduced in the last 3 years.  Dead or slow-moving inventory clogs up the arteries, get rid of it quickly. Allowing inventories to build up excessively increases the risk of stock becoming obsolete and worthless.

Markets need to be carefully watched in order to identify innovations that can render your stock obsolete. Often it is not possible to shift excessive stock quickly without taking a significant mark-down. I know some business owners take pride in their high stock levels. They see it as some sort of buffer or reserve for a ‘rainy day’. But be warned it can quickly lead to business failure. Good record keeping and understanding your requirements will help you to keep good control.

Large numbers of overdue debtors

One of the first places advisors and financiers look when faced with a struggling business is the debtor’s situation. The older the debtor the less chance you have of collecting it. When you write off a bad debt it comes straight from your bottom line. or net profit. Customers tend to stop dealing with you because they owe you money, they want to save embarrassment so they deal with someone else. At times it will be difficult to borrow more money because the lender sees the overdue situation beyond a safe limit.

Not pricing products and services correctly

Not understanding the difference between markup and margin can be a disaster. I have seen retailers being offered an 80% markup and then immediately put on a ‘50% off sale’ and then wonder why they are losing money when they are ‘making 30%’. Many businesses price their product according to what others are doing, or their gut feels as to what the customer will pay.

Of course, this can also be a formula for business failure. You need to look at all the price components as they apply to a particular business. Pricing is always a tricky and the more critical the price is to your business’s success, the more difficult it is to set. The most important thing to consider is your product’s value to your customers, understanding this and how to sell it will go a long way to averting failure.

No market segmentation

Trying to service too diverse a range of customer types and sizes can leave a business totally out of control. You cannot be everything to everybody and hope to avoid business failure. Be selective in the customers you wish to service. Otherwise, the poorer customers, the ones who do not really relate to your product will take up valuable time. Time, you could have more profitably spent on the customers who do relate and like your product. If the balance is not right you will soon alienate many of your good customers because you no longer have time for them.

Relying on too few customers

Reliance on a single product or on too few customers can also be fatal. There are many businesses depending on one or two customers who are sometimes responsible for 40%, 50%, 70%, or more of the entire business turnover. It is very hard to avoid a business failure if suddenly, for whatever reason, you lose a customer that makes up even 20% of your business turnover. Never mind 30% – 50% of your turnover. A hard one for the inexperienced is continuing chasing too many ‘big deals’.

Big deals can take too long to close and the competition is generally stronger. Focus on what you can handle. Little fish are sweet until you grow up and your organisation is mature. People who have ‘big deals’ usually only deal with ‘big companies’. Never rely too heavily on one customer to make your business successful. This does not mean that you shouldn’t focus on getting a ‘big customer’ to get your business off to a fast start.

Relying on too many poor quality customers

Yes, too many poor quality customers can sink your business. Mostly it costs the same to service a good quality customer as it does a poor quality customer. It, therefore, stands to reason that with too many poor quality customers you will find it difficult to cover costs. It is also worth noting that good customers don’t want to be associated with poor quality customers. They know they will be draining valuable resources for the business. Try grading your customer base and deliver your resources accordingly.

High level of complaints unattended to

This is an early warning sign. This will eventually come about because of inadequate staff and service levels to adequately address customers complaints, problems and frustrations. It starts with poor or unenthusiastic references being made about the business, by both customers and employees. Adverse rumours about the business can cause it to lose customers and eventually support from the other stakeholders. Focus on customer service and the customer’s experiences if you want to avoid business failure.

Low employee morale 

Low employee standards, poor work habits are symptoms of underlying issues that can cause the business to fail. If the skill base is too low to meet the customer’s expectations it can demoralise employees, perhaps without anyone knowing until it is too late. It is a problem when the actions of your staff do not match the rhetoric of the salespeople.

Do everything you can to boost morale, making work more fun and enjoyable. This is especially important where there is a lot of customer and supplier interaction. Over time a more enjoyable workplace will head off a pending business failure. Take a long time to hire, but the fire quickly. Selection of the right people is a prerequisite for success. You need to select the right people with the right attitudes and values in the first place and then you have to train them well.

Expanding too quickly

A leading cause of business failure is overexpansion or trying to grow the business too fast. It often happens when business owners confuse success with how fast they can expand their business. A focus on slow and steady growth is optimum. At the same time, you do not want to inhibit growth. Once you have an established solid customer base and a good cash flow, let your success help you set a well-measured pace.

Some indications that an expansion may be warranted include the inability to fill customer needs in a timely way. Another indication is when employees are having difficulty keeping up with production demands. If expansion is warranted after careful review, research and analysis, identify what and who you need to add in order for your business to grow. Then with the right systems and people in place, you can focus on the growth of your business, not on doing everything in it yourself.

No website and related technologies

Simply put, if you have a business today, you need a website. This should not be open to debate. At the very least, every business should have a professional looking and well-designed website. A website that enables users to easily find out about the business and how to buy products and services?

Later, additional ways to generate revenue on the website can be added, but keep it simple in the first instance and grow it as you progress. If you want to avoid business failure before your sales and marketing campaigns are underway. Before you rent lists, before you start writing clever copy, think about the buyer’s first step in the buying process.

Think about where your future buyers go to educate themselves, discover solutions or make comparisons. That’s where you want to be. This means making sure you’re easily findable and prominent on major search engines using key phrases that are likely to be in buyer’s minds. The Internet is forcing us to stop focusing on our products and services and focus on the customers who buy them.

Too much “high tech” not enough “high touch” can be a problem

Social media can become intoxicating; it can cause you to lose touch with reality. Social media will never replace “high touch”, or direct contact with people. Technology has been and will continue to be a great liberator of smaller businesses. But never lose sight of how your customers like to be dealt with. The business case should always precede the technology case.

Unfortunately, it has become too expensive to maintain high levels of personal contact in some business. You need to utilise the new technologies in social media and be able to understand ‘digital body language’. The building of a social enterprise and the new ways to market our products and services can make all the difference.

Social media can cause business failure. As new technology sidelines you, it puts you in a non-competitive situation. As well you are faced with updating costs,  you may not be able to afford. Social media is causing the fastest evolution we have ever seen, compared to most of our past innovations that took decades. As Bill Gates says, “things are changing faster than we can think”.

Too many projects on the go

People become overwhelmed if there are too many projects on the go. Particularly when there are insufficient, or inadequate resources to manage them properly. When limited time and resources are spread over too many projects the result is poor productivity, uncontrolled change and excessive stress. The business can be quickly brought back under control if all the projects are prioritised and each one properly resourced before it is commenced.

Support can start to fall off for your organisation because people can sense it is out of control. Or they think it is failing because of the erratic behaviour. This is the time that you and your supporters should step forward and seek positive solutions. If this doesn’t happen, business failure is usually only a short time away.

Not putting the right emphasis or effort into the right things

Not putting the right amount of emphasis or effort into the right things or the things that will make the business go where you want it to go. Or where it is possible to go, can cause business failure. It is one thing to be efficient it is quite another to be effective. Too many business failures result from the people doing too much of the things that they like. Forgetting about the things that they don’t like doing, irrespective of their importance.

Every challenge you overcome gives you the strength to take on bigger challenges if you put effort into the right things. Never let what you can’t do interfere with what you can do. Analyse your customer data to discover patterns and then develop prediction models. Use the model to drive customer engagement through better experiences. Put emphasis on the things that will have the biggest positive impact on the business and things that you have high management control over.

Let others worry about the day-to-day activities and sideline the things that you have no control over. Diverting attention and resources from core business activities can be tempting. Most people like to pursue a new and exciting project. But if it is not properly resourced, or it is allowed to draw resources from your core business activities, it can only spell disaster.

Poor, or no sales power

The business does not understand the various sales activities needed to achieve the results that were wanted. They fail to appreciate that nothing happens until a sale is made. It is sales that make the world go around. Improve your commercial value by continually investing in your people’s professional development.

Having the right mix of salespeople or sales experience to drive the total sales effort is critical. Even though traditional sales methods and activities are being rapidly overtaken.  Just because a person has a sales title does not actually mean that they know how to sell. There are three main ways to see your sales operations and use them to avert a business failure:

  • There is the Right Way – The glass is a half-full view, where you start to see the many opportunities opening up.
  • And the Wrong Way – The glass is a half-empty view, where you see all the changes taking place as a big threat.
  • Or the Same Old Way – Maintaining the status quo and expecting a different outcome is insanity.

We’re in a new era that brings with it urgent and compelling forces. Including mobility, the cloud, analytics, robotics and social media and an explosion of information. Mass collaboration enables employees, customers, suppliers and all other stakeholders to participate directly in the creation of value. Once, our products and services gave us an edge, but not anymore.

The need to actually merge sales and marketing efforts with the new technologies is critical. You need to learn about the new ways to sell your products and services, or you will miss out.  The cloud, social media and mobile combine the new nexus. The impact of these forces is making methods we used in the last 20 years obsolete.

Competition is too severe

Severe competition can cause business failure almost overnight. At least one competitor somewhere in the world is gathering information about your best customers, right now. The basis of competition is shifting from businesses to strong distribution channels and good customer bases, to those with strong information technology, communications systems and knowledge management.

If you are not adjusting to this, failure will not be far away. Few organisations operate in a competitive vacuum. So failure to consider and/or plan a business’s competitive position may result in major problems developing.

Management often fails to recognise the competition and the competitors involved. Or simply proceeds on the assumption that it has no competition or competitiveness is less intense than actually exists. Conduct a competitive assessment on a regular basis and continuously gather competitive information.

The ‘One Man Band’

A typical situation that often results in a business failure is the ‘one man band’.  A person starts out with a small investment and a good idea. They make up the entire management team of the business. They generally have modest but adequate capitalisation, they are good sales people and have a good business sense as an administrator.

Because the basic idea and technical skills are strong, they are successful within a relatively short period of time. It is largely as a result of their own personal drive and ability. As they expand they collect a group of competent employees, but they still have the habit of making all the decisions themselves.

This type of business owner will lose the services of very capable people. People who recognise that their opportunity for personal growth within the business is limited. One-man bands tend to fail because the person becomes tired and loses energy, sales fall off, profits start to disappear and the end becomes predictable.

Poor location

Location can be critical. A good location may enable a struggling business to ultimately survive and thrive. A bad location could spell disaster to even the best-managed organisation. People often worry about whether we are in the wrong business at the wrong time. The right business at the wrong time. Or the right business at the right time.

‘Timing is everything’ and location. location, location are two saying, two critical ingredients for success in business. We need to seek out the right business to be in at the right time and in the right location. Just because you go into business doesn’t mean that customers are going to beat a path to your door.

Failing to check obligations

Many people have gone into business without properly checking their obligations as a business owner first. They have taken too many things for granted. In some cases, a business analysis, or due diligence, would have made a significant difference. Particularly to decisions on whether to proceed with the business venture at all or, how it would be structured to comply with their obligations.

Poor systems and documentation

Handling the basic processes for your business can be critical. Such activities as how you do your accounting, pay a bill, minute meetings, do reports and handle Workplace Health and Safety procedures. Even steps in filling an order should be flow-charted. This is so that someone can come in and pick up the reins if a key employee is unavailable or leaves suddenly. Having poor systems leads to continuous struggle and certainly hampers profitable growth and sustainability.

Founders pet products stop selling well

The business owner falls in love with a product or service that they had developed an over-reliance on. These products leave the organisation vulnerable to innovative competition. Many products become obsolete very quickly in today’s market with consumers demanding more and more and quicker and quicker. Many businesses fail because their owners are too proud and stick with their old products.

Don’t overlook the proud old ‘founder’. Wanting to interfere all the time in new products until the current operatives start leaving and leave the business exposed.

Being in an old type of business that is no longer viable

Many businesses have failed over the years because they thought that their once very profitable business would continue to “go on forever”. Suddenly they find that the market no longer requires their type of business or the type of products that they sell.  They become like an old engine they keep having the occasional splutter with loud bangs, but they have little power and eventually die.

Use of company funds for excessive private purposes

This can bleed the business of much-needed capital for its survival. Particularly if there are a sharp downturn and the money cannot be repaid quickly enough. You need to carefully balance your living standards with what the business can afford.

Owners and or the entrepreneur is exhausted

 Owners and entrepreneurs become worn-out and they underestimated the time requirements of the business. Either way, balancing personal and business time and resources are key to success and must be managed well; no excuses. When some people get exhausted they tend to become preoccupied with details and are either unwilling or unable to see or deal with the ‘big picture’.

There are no assessments made of risks

Risks are different to weaknesses in that they deal with the future and the big risks are normally external to your business. What market forces exist that could prevent your business from being successful in the future? You should maintain an up-to-date Risk Management Plan. Consider the possible impact of new technology, legislative issues, changes in consumer demand. Along with a variety of other issues that could negatively impact your business. 


Fraud is a deliberate deception made for personal gain at the expense of others, or to damage another individual. Never overlook the possibility of fraud, we hear about it every day. White collar crime in all businesses continues to rise.

Employees can be syphoning off little bits of cash every day. When there is cash involved, others disgruntled employees can even set up a sting. You have to be vigilant and with a weather eye on scams. Employees should also be educated and alerted to fraud and given procedures and measures to avoid it.


There is much you can do to prepare for the impact of the many disasters facing organisations in today’s world, such as:

  • Droughts, floods, cyclone, earthquakes.
  • Power and communications outages.
  • Accidents, crime and acts of terrorism.
  • Technology-related disasters with equipment or software systems.
  • Malfunction of plant and equipment.
  • Health and well-being issues such as the flu, virus pandemic.

Prepare a disaster plan for your organisation and stay informed.

No succession plan will often lead to a business failure

A sobering thought! When the owner or a key person in a small business dies, then more often than not the business dies. What are you doing about your management succession and your business succession, Both are critical risk factors? When someone dies, things will happen beyond your control, but at least you can minimise the impact.

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 from my mistakes and failures”. Peter Sergeant


Seek out the services of an entrepreneur to help you join up the dots.

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