Why Do Businesses Fail? Part II

Published: January 6, 2020

Courtesy of Fusephase.com

This blog is part II of “Why Do Businesses Fail?” When Annette B. Haag, on January 1, 2013, had published “Writing a Successful Business Plan.”, some 20-years earlier, Ricketts, Van Auken, and Manning (1993) had made somewhat of the same conclusion of why businesses fail. And above we have a chart from Fuse Phase, com echoing reasons why companies fail to grow. So knowing all this, why do entrepreneurs still make the same mistakes and fail?

The small business economy is so important in America the understanding of why so many businesses fail is indeed an important topic to take up in today’s business climate. And the health of our business economy is dependent on small businesses being successful, so how do we change this failure rate? In this writer’s opinion, it is education. This writer did the same thing, and he entered into the business world through sales and was good at it. So my heuristics lead me to believe that with this skill-set, I could successfully operate a business.

It was not until the 2008 Financial Calamity in the mortgage industry that I made a conscious decision to go back to school and continue my education. Eight years later and $160,000.00 in student loans, I have a terminal degree in business, a Professional Doctorate of Business Administration in Entrepreneurship and Business Management, M.B.A.-Marketing, and Bachelors-Marketing and graduated Cum Laude. This new knowledge and self-confidence have changed my entire attitude on what was uncertain of in the past. One caveat on business management that is still not taken seriously is the developing of a written business plan. So ask yourself this question if all the scholars suggest the development of a business plan could enhance the success of a business over that of not having one, why would an entrepreneur not develop one?

The business plan is the number one reason for business failure. The second is leadership skills or management, and the third is cash-flow management. Entrepreneurs should go through education to focus on why businesses fail and concentrate on not being that next casualty in industry. The entrepreneur not being efficient in the operation of his/her enterprise is another recept for failure, and this could be from the lack of knowledge on how to properly manage a business, which could come from the lack of experience of being in management. Thus, this could come from training in the management of learning what managers do to be successful over that of guessing.

Record keeping is so important in business and the sloppiness of handling of records that could be, needed for the management of the company in the future is an asset for control and not a hindrance. Undercapitalization or the lack of recourses and not planning for the future will put the business at risk, then bankruptcy or insolvency is around the corner for the entrepreneur.  Employees are firms other assets, and as a wife, if she is unhappy, then the household is in chaos, so it is with a business organization. Keep the employees happy, make it fun coming to work and maintain the family-like structure, and have the workers feel they are making a difference within the organization.

In the 21st Century, the internet, information, and technology is key to this digital frontier. Twenty years ago, these three were in their infancy, now they are the backbone of commerce and the three is a part of everything this new generation is involved in today. The upgrade of technology, software, cloud computing, websites for businesses, and the use of software-as-a-service (SaaS) is a must for today’s entrepreneurs to stay competitive in his/her industry. Entrepreneurs must always understand after the sale the deal is, done, customer service is the sealer on the business deal of continued service granted to them to show the business cares and want them as a customer. It is, proven it is cheaper to keep a customer satisfied than to find another one to replace the one lost.

And finally, change is part of life, and nothing stays the same. Without modification, the entrepreneur becomes complacent. A strong leader is a visionary, and without a vision, the business will falter and cease to exist in time. So I challenge new want to be entrepreneurs, learn about this new career that you are incurring, educate yourself on developing a skill-set. Careers and jobs are about specialists or specialties and not generalists; learn to specialize in something that others will pay.

Reread once again the reasons why businesses fail. If this is your career choice, would not it behoove you to learn as much as you can to be successful and not be a failure? So come back next week and read part III of why businesses fail.


Ricketts, Van Auken, and Manning, R. (1993). “A Factor Analytic Study of The Perceived Causes of Small Business Failure. Journal of Small Business Management”; Oct 1993; 31, 4; ABI/INFORM Collection.

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