The Main Causes of Business Failure and Solutions

What is the main reason that entrepreneurship fail ? Most small businesses fail because of mismanagement.  What are essentials to avoid uns...


What is the main reason that entrepreneurship fail? Most small businesses fail because of mismanagement. What are essentials to avoid unsuccessful enterprise? 
Among the main reasons, most businesses fail because of weak management in general, poor financial management and weak capacity of marketing.

The causes of business failure and solutions

The entrepreneur carries with them a law: "insurance is going to fail," so they should not see failure as something negative but as a virtue, academics agree.
The Main Causes of Business Failure and Solutions
The Main Causes of Business Failure and Solutions
Failure should not necessarily be viewed as negative. The entrepreneur must see it in another way because there is a law: "inevitably it will fail," and that is where Failure becomes a virtue and skill." says Sergio Ortiz, Academic Director of Entrepreneurship at Technology University, Mount Katt.


The leading causes of business failure ranging from planning deficiencies, mistakes in analysis processes, lack of indicators to monitor what is happening with the funds are poorly administered and implementation issues, finance, and administration.
"The leading causes of business failure" in a study that came out after applying 409 surveys and focus group. Throughout the chapter, scholars met with failure factors that seem obvious and others who are striking.
Also read: 6 Things to Consider When Starting a New Business

Let's see the highlights "how to avoid business failure":

1. Where does the entrepreneur fail?

Having the money to start a business or a good idea is not enough to become a successful entrepreneur. The common denominator in the failure of entrepreneurs is the deficiency in planning, said Francisco Layrisse.

The issue of planning is broad, as the entrepreneur can fail because he does not understand the market well where it is reached until he does not know how long it can take his business to generate enough income to support itself.

Mario Davila, also an academic at the EGADE Business School of the Tech Entrepreneur, described the personality of an entrepreneur: "He is someone who is looking for new experiences. It is not necessarily a careful person to carry out a quantitative analysis of expenses, income, and expenses "and is when you must have the support of the right people because" you can not do everything only because you do not dominate all the land."
Also read: 8 Most Important Characteristics of an Entrepreneur

2. The entrepreneur and his little love for finances

Four out of 10 entrepreneurs had problems related to finances and another four out of 10 had problems with the administration.

"It's impressive that as entrepreneurs tell you: I'm running away from finances or I'm giving everything to the accountant," Davila said. 
Entrepreneurs rated it as a big mistake not to keep track of their money.

The causes of failure can have one, two or more reasons, so the study encompassed the different aspects of failure in six large blocks:
Also read: 10 Common entrepreneurial mistake 

  • Finance area
  • External factors
  • Administration
  • Human Resources
  • Marketing

The technical dimensions of the business

Sergio Ortiz When he said that the entrepreneur has two moments marked: when it is starting and when it starts to sell. When you are starting, the primary cause of failure is that "there is no market" and when you start selling, "you have no idea how to manage cash flow."

3. Money is not everything, but it hurts to lose it

Francisco Layrisse explained that the entrepreneur must know very well how much money is willing to risk. Entrepreneurs think their business will give them money right away. The academic recommends three alternatives to those who are going to undertake:

Try to find funds that are not yours because it is easier to play with the money of others, which is sometimes tough to get. Even if a good project is presented, he says, it is possible to do so.
Have substantial savings before starting to undertake in case things do not go as planned or stay in the street.
If you want to start but do not want to risk everything. You can start with a venture in which you can, in one way or another, continue working and ensure that you have an income that covers current expenses while the investment begins to take off.
To do experiments is okay, risk the family patrimony is not, said Sergio Ortiz, who added that it is a good idea to do experiments that do not cost the entrepreneur or that are reasonable losses, learning losses. 
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Hard data

In the results of the study, which included the application of 409 surveys and focus group, other data such as:

  • 90% of entrepreneurs had failed before their business was two years old.
  • 66% of the unsuccessful were people who had a career. Having a university degree is no guarantee that you will not fail.
  • 66% of respondents were men, and 34% were women. A pleasant surprise because this implies that "women are taking an increasingly active role in what companies are and start a business," said Francisco Layrisse.

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