3 Reasons for Business failure

Business Failure

One of the main things that differentiate smart business people from busy and hard-working people is simply the way they make business decisions. Busy and hard-working people will make business decisions based on assumptions, gut feeling and common sense which is not very common. On the other hand smart business people will make business decision after knowing the facts. They exactly know how a particular decision is going to impact their business. They will have Plan B and Plan C in case something in the original business plan doesn’t work. Busy and hard-working people, since they are busy and hard-working cannot think or visualize their business from a larger perspective. They make certain decisions and they pray and hope that after three months or six months the decision will bring profit to their business.

Let’s have a look at what are the main reasons why businesses fail.

  • ASIC (Australian Securities and Investment Commission) report 2010 said that poor financial control, including lack of records was the main cause of business to fail.
  • Rabodirect online Bank did a survey and found out that poor cash flow management has been blamed for 90% of small businesses to fail.
  • A survey was conducted in Australia involving thousands of business owners. The major finding of the survey was that Businesses are most likely to fail because of inability to manage costs.

Friends all these reasons boil down to one main reason which is finance mismanagement. Does it mean that good Financial Management will guarantee success in business? Well I am not saying that. Think about this – Poor financial management can single-handedly bring down any organization within matter of time. Understand this – “Finance is the root of how business makes money”


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