Characteristics of Successful Businesses:

  • Sensibly financed
  • Strong cash position
  • Above-average profitability
  • Rapid growth in revenues
  • Attractive, market segments
  • Strong brand
  • Competes on non-price issues
  • Very close and responsive to customers
  • Seeks specialist/leadership image with superior offerings
  • Well managed with high-grade staff & good people-management

Now look at unsuccessful businesses…

Basic Reasons Why Businesses Fail

Finance Markets/Sales Management Products Operations
Underestimating start-up costs Misjudging the size or growth of the overall market Lack of relevant sectorial experience Inability to supply profitably to required price Under-investment in equipment etc.
Insufficient funds or access to top-up finance Overoptimistic estimates of market penetration & shares Insufficient functional breadth Problems with maintaining quality standards Excessive overheads (relative to scale of operations)
Wrong mix of funds (e.g. too much debt and gearing too high) Delays in securing or developing distribution channels Unresolved differences of opinion Restricted range of offerings High operational costs and/or low productivity
Over reliance on trade credit (receivables) Underestimating the strength of competitors Unreal expectations Lack of innovation (me-tooofferings) Poor capacity utilization
Mistaking profit for cash flow Misreading customer requirements No formal or clear structures Problems sourcing supplies Inadequate physical distribution
Overoptimistic projections or overtrading Lack of promotion & customer awareness Ineffective financial & managerial control systems Offerings out of line with customer needs Inappropriate business location
Unable to withstand interest rate increases Inability to handle an economic slowdown

 

Most small businesses fail because of mismanagement. According to Statistics Canada, (Failing Concerns: Business Bankruptcy in Canada, 1997), most businesses fail because of weak general management, weak financial management, or weak marketing capabilities.

It’s not the business conditions. Simply because the owner understands the technical aspects of his profession does not enable him to know how to run and grow a business

Business development skills are as important as the professional knowledge held by most business owners about their trade and profession.

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