Further reasons for business failure

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This is a guest post by from Business Recovery the business turnaround specialists.

There are lots and lots of reasons why a business tends to fail and the most obvious ones have been detailed below.  With the double dip recession we are currently in, many people are finding it even harder to find full time employment and therefore creating businesses out of their interests to try and make a living.  The country is already seeing an increase in new businesses. The main reasons for a business failure are as follows:

- Lack of funds

- Wrong location

- A business plan lacking detail

- Poor execution

- Poor management

- Trying to expand far too quickly

- Lack of understanding of competitors

These reasons are often the cause of business failure but there are less known reasons that are not so obvious. 

1. Too much focus on short term profits

As much as it is very important to be profitable, but not when achieving short term profits comes at a cost of the lifetime value of a customer.  For example using cheap ingredients in a drink so to sell cheaply to customers as well as making a big profit margin.  The drink may taste horrible and customers will not return.  While the business will make a profit in the short term, not of these customers will be returning.

2. Ego v business opportunity

Most entrepreneurs create a business through an interest of theirs and this may not necessary be filling a need in the market.  This is often seen in the bar industry, as too many people are opening trendy bars as it is seen to be cool, fun and possibly easy work.

3. Distractions

Being in business is not a 9-5 job.  The best ideas are thought while driving or trying to get to sleep at night.  Sadly, there are many things that can cause distractions and take the focus away from business including relationship troubles, children, illnesses and death.  As many businesses need creative ideas, when distractions occur it can affect the business.

4. Friends and family

When business is involved, friends and business do not mix.  There are many family run businesses that do not work because honest and objective advise is not given.  Many people find it very difficult to give out constructive advise to avoid feelings being hurt.  Unfortunately this is not the way to be doing business and is the main reason family businesses do not work. 

5. Safety net

Most entrepreneurs starting on, do so by starting the business on a side line to their current full time work.  They often do not give up the day job incase the business fails.  By thinking like this, it is possible the business will fail.  Secondly if there is a safety net in place paying the bills then not as much effort is going to be put into the business.  There is a huge difference in the businesses that survive and those that don't when your life is dependent on it being a success.

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