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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