The 8 Traps Causing Failure

Business Failure, The 8 Traps Causing Failure
And The One Attribute Which Ensures Business Survival
By Kelvyn Peters

Editor's Summary: Poor management and poor money sense are the number one reasons why businesses fail within the first twelve months of opening their doors. Learn how neglecting to write a business plan, and not recognizing a very real need for experience can lead to business failure. Read about the other six traps presented in this article.

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It is estimated that 78% of all small business start-ups fail within the first twelve months years, and long-term survival is likely for only 22% of all new business start-ups.

At the same time huge corporations with seemly vibrant trade suddenly close their doors.

Why is this so?

An analysis of the reasons for business failure suggests that over 60% of all business failure is due to poor management practices.

The one attribute which must exist in every firm The only rule to survival is that money in must be greater than money out. We often forget this. Too many entrepreneurs think that extra cash will solve almost every problem. Good management - not money - is the key to a business flourishing or dying.

Does this mean that the old saying about using other people’s money is wrong? No! But the money coming in each year must be greater than the money going out for expenses, owners’ private expenses and the costs of servicing loans. Profit is vital to a business but cash is king.

No cash no business

Learning management skills

There are two very good ways for small business owners to learn management skills.

One is to find out what the “high-fliers” in your industry do, and do the same! Perhaps then you will become a “high-flier” too!

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Another is to study the mistakes of others. We have identified those often made by business owners.

The following are the 8 traps which cause business failures.

Trap 1- Discounting the need for experience

If there is one thing that distinguishes big business management from small business management, it is that the owner/manager must be the chief cook and bottle washer in a small business whereas each of the different facets of a business such as accounting, marketing, purchasing, research, training and sales, has a specialist who is responsible for them in large firms.

Seldom does one person have an in-depth knowledge or experience in all management disciplines. So the businessman who has a real skill in only one or two needs to be strengthened by knowledge in the others.

The best Chef in Australia will find it hard to succeed in business for himself if he has no skills in marketing or financial matters.

One solution is to get some training in operating a small business before you start; Colleges now have good programs for the intending new purchaser.

The owner should review her own weak points. The gaps can then be closed by a crash self-development program, getting some knowing partners or staff, or by hiring outside consultants.

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