Why businesses fail


Robert Gonye
The thought of starting a business can be a daunting one especially given the plethora of business failures. Global statistics show that 90 percent of businesses close shop within the first year of opening and less than 1 percent survive for 5 years and 10 percent of this 1 percent are there at year 10.

The question rarely asked is; what makes businesses fail?

Knowing this will alert you to the things to be vigilant about to ensure your business survives.

Below are some top reasons why businesses fail:

Subsistence mentality: this is a mind set focused on daily survival and never about growth or ambition, like your traditional shoemaker who has been under the same tree for the past 20 years. The other behaviour that reveals this mentality is job-hunting instead of job creation.

Lack of leadership: The inability and lack of leadership is a sure recipe for failure. Leadership has to be personal first. This is exemplified by the level of discipline one exercises as they run their business- being on time, working during working hours recording and banking all received money. After leading yourself one must lead the business in terms of its vision, direction and values.

Underutilising resources: Most people never maximize their time, gifts, relationships, and opportunities to make them move forward. These are resources that are in your house, in your hands and within your reach. Things that you neglect and abuse yet they have the potential to positively affect your business.

Never developing your capacity: Once you start a business, gaps in your abilities and capacity are exposed. Instead of developing and strengthening those areas to move forward most people ignore and minimize the effect of their deficient. Ongoing training on business topics becomes paramount.

Poor Cash flow Management: This is one of the biggest causes of business failure. Usually, this is due to mis-understanding between assets and cash flow, profit and cash at hand. There is also rampant cash abuse, over-investment in nice to have things that don’t increase the cash flow. The other ignored cause for this is growing too rapidly and ending up with no money to survive.

Government policy and laws: You must keep abreast with the legal framework you that affect your business. These can be changed over night like importation requirements or restrictions. Compliance with tax laws and license requirements are all-important not ignoring these as they can be grave.

Lack of experience: every business has trade secrets, one piece of the puzzle can be missing and cause the whole business to collapse. As you plan a new business, there might be things you may overlook or ignore, it pays to have a mentor to show you the blind spots some being detrimental to the future of the business. Never under estimate the power of inexperience.

Choosing a poor location for the business: Being located at a site short of the customers that you are targeting, a site too expensive for your current income level, poor accessibility will result in business failure.

Lack of perseverance: Most people give up too easily. Business rewards the serious and proves them by what you do when things become tough.

Lack of patience: this is the curse of Zimbabwe, the desire for fast and instantaneous riches. Some quit too quickly because the profit delayed. Patience is an advantage in business.

Lack of flexibility: Things never happen the way you planned. Things change so fast that one needs to adapt to the current environment to survive. Be willing to change to what works and sells. While in it you will see better opportunities. Be flexible and change to the things that bring money.

If you watch out for these your chances of making it in business will definitely increase exponentially.

Disclaimer: ROBERT Gonye offers corporate, individual business coaching and training to enhance business performance and profitability as a consultant. He will not be liable as the information given is for educational purposes and advice. User to consult their business advisers. For views and comments: robert@realgrowthsolutions.net


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