Business Failure

Businesses in Australia are overwhelmingly small, around 96 % of the total and according to the Australian Bureau of Statistics, more than 60 percent of small businesses are likely to stop trading within their first three years.

Forbes in America puts the figure at 97% fail in the first 10 years. So what is going on? Why such a high failure rate?

There are likely a number of common factors that are causing this business mayhem.

Firstly:?Cash is king and most small businesses (and some larger ones) do not realise that profit is a theory and cash is a fact. Simply without enough cash to pay the ills the doors will close.

Secondly:?Poor strategic management. Many businesses do not have a clear set of goals, objectives, and tasks to undertake and pursue to ensure that they thrive never mind just staying alive. They get caught up in the day-to-day of running the business but spare little attention to long-term plans.

Thirdly:?Too many businesses are undercapitalised. Without sufficient reserves to pay the bills and staff whilst sales grow to a sustaining level means many a business - small, medium, and large – run out of cash and have had to close up.

Fourthly:?Many businesses start with a bad idea – often one fostered by either an internet marketing guru or a belief in the ‘follow your passion’ school of business destruction.

Lastly:?Many businesses don’t know what they don’t know and rather than seeking support and advice they get carried away in the romance of being an Entrepreneur or business owner and come unstuck because they were under-educated and were not self-aware enough to seek assistance.

There are more reasons for business failure –?

What are a few that you know and how would you go about avoiding them?