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7 Major Reasons Why Business Failed


Have you ever wondered why businesses fold up unexpectedly. It may be a small upcoming business or a well known company which may shut up partially or completely. People often wonder why companies fail, and aspiring entrepreneurs make it a point of duty to find out why in order to protect their business.

There are so many reasons why businesses fail. In this article, we are going to discover 7 common reasons. They includes-

Lack of Adequate Financing-

This is one of the major cause of business shutdown; when you don’t have adequate finance to support your business, and you don’t receive financial aids from people, your company is bound to fail. All businesses needs adequate financing to survive, and as time goes on, the financial obligations would increase because you would have to produce more, advertise more, employ workers and so on. So, the average finances you used for your business initially would not be sufficient to run that same business in the coming months and years.

The fear of exhausting all of One’s finances is what makes business owners seek for partners and investors. Those who can’t find themselves partners, investors, or other sources of financial support would have no choice but to close down the company or business.

Dispassionate Business Owners and Workers-

Another leading factor of companies and business’ failure is dispassionate business owners and workers. Anyone who wants to start his or her own business or company is always advised to start what you love doing, and people who are seeking for employment are also advised to search for a job within their field of interest. The reason is because when you are passionate about a work, you would carry out your duties effectively and with ease, but when you are dispassionate about what you do, you would be struggling to do well and won’t want to push yourself to deliver the very best.

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Likewise, running or being part of a company or business is demanding; you would be able to make those demanding sacrifices if you have passion for your work, but when you don’t, it would feel like a burden on you. Therefore, when you are a business owner who is not passionate about his or her line of work, or who employs people who are not passionate about that field of work, your business or company is bound to fail.

Poor Leadership and Managerial Skills-

If you don’t take your business seriously, no one will. As a business owner, your duty is to lead your team of workers and manage the affairs of your business. People respond positively to active and strong leadership. When you are always on board to ensure that your business is running smoothly, your workers would be committed to work diligently in order not to be found lacking. However, if you don’t take your work seriously, or don’t enforce rules and guidelines to be followed, your workers would feel relax, less committed, and this would lead to poor quality of work done. Most companies and businesses fail because the owners possess poor leadership skills and manages the business poorly.

Inability To Compete With Other Companies And Businesses In The Market-

The business world is a competitive one where all companies and businesses that sell the same type of products or render the same services are in constant competition to get customers. In order to survive in such environment, business owners and service providers have to package their products to look different, unique, and effective. By packaging what you offer in a unique way, you would attract customers to yourself. Also, because you are competing with other companies to get customers, you would be under constant pressure. The inability to compete for customers and survive under the pressure of competition is what leads to business failure.

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Insufficient Marketing And Poor Marketing Strategies-

Your aim as a business person is to create awareness about your business and ensure the news gets to your targeted market so they can patronize you. In the light of this, effective marketing is very important for every business. Also, remember that you are competing with other businesses, so you would have to equal or surpass their marketing skills and strategies if you want to make a difference. However, when companies and businesses pay less attention to marketing or adopt poor marketing strategies, they are bound to fail.

Lack Of Preparedness For Unforeseen Circumstances-

The business industry is a place where anything can happen. Every business owner needs to be aware that anything can come up and affect the business market, thus One must be prepared for unforeseen circumstances. For example, major unforeseen circumstances can be caused by pandemics, war, recession, government policies and declarations, natural disasters, etc. Recently, the Covid-19 pandemic made business owners understand that anything can come up one day and majorly affect your business. Because of the Covid-19 pandemic, many businesses and companies were forced to close down for many months, and many found it difficult to get their business going after the pandemic, and some businesses could not pick up from where they left, so they had to shut down completely. The major cause of the business problem at that time was their lack of preparedness. They did not put measures in place that they could fall back on in case of a circumstance like that. Therefore, lack of preparedness for unforeseen circumstances can lead to business and companies failure.

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Ineffective Business Plan-

Before launching a business, the founder needs to have a business plan that properly lays out the course the business would follow, the vision, goals, financial plans, marketing strategies, long and short term needs, and so on. However, it is not enough to just have a business plan. Your business plan should be effective, convincing, easy to understand and work with. Ineffective business planning is one of the reason why businesses and companies fail.

In this article we have discovered 7 major reasons why business failed. I hope the knowledge of this would help entrepreneurs protect their businesses from failing.

Thanks for reading!

Photo by Nathan Cowley from Pexels