Business failures – reasons

According to Forbes, these are five reasons 8 in 10 businesses fail.

  • Leadership breakdown at the top
  • Not really in touch with customers through deep dialogue
  • No real differentiation in the market (lack of unique value propositions)
  • Failure to communicate value propositions in clear, concise and compelling fashion
  • Inability to nail a profitable business model with proven revenue streams

I would have to say leadership is an enormous part of how successful a business is.  The leadership team needs to create direction and effectively communicate the strategy throughout the organization.  It does not matter if you are just a small pizza shop or a fortune 500 company.  Without great leadership, the risk of your business failing is high.

Secondly, not being in touch with your customers is a huge mistake.  At the end of the day we are in business because of our customers.  If we are not able to truly understand their needs, then we are just shooting at our targets blindly.  Our customers want to know that we care enough to get to know them and sell them products that meet their requirements.

Third, selling products that are no different from our competitor’s products does not benefit us.  Our customers want to know why our products are better.  This could mean we are better priced, have better quality, provide better performance, and so on.  Our customers want value for their money, which is understandable.  It is our job to provide the value they want to gain their business.

Fourth, even if we do develop a product that meets our customer’s needs, are we properly communicating it to our customers?  For example, if you are selling an energy drink that can boost someone’s energy by 50% for 10 hours, is this being properly communicated?  If this is what is most important about the product and your biggest selling point, you need to make sure the label reflects that.  It would not do you any good to add a bunch of claims on the label that may not matter as much as this priority highlight.

Fifth, we all need profit to stay in business.  It can be difficult to turn a profit if you have a lot of overhead and small margins.  It is crucial to make sure your P&L makes sense and will allow you to take home a profit.  It can pay to do a few paper exercises before you get too deep into the business.  We want to lower our risk of failure whenever we have the opportunity to reduce risk.

These are the five reasons 8 out of 10 businesses fail according to Forbes.  This does not mean there are not anymore.  It is interesting to see what others say about business failures.  There could be 1,000s of reasons for different circumstances, but these are most definitely common reasons.  It does make sense to learn as much as we can about our businesses, customers, strategies and so on.  Education is key to reducing risk.  Nobody likes to think they can fail, but it is very possible.

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