5 MOST FREQUENT CAUSES OF BUSINESS FAILURE

If we want to talk about success, it seems contradictory that we start talking about business failure. However, the logical thing to do is to start there. It is as important to know what should be done as what should not be done. I am sure you know that famous statistic according to which 9 out of 10 companies have to close before their fifth year of life. I can tell you that, from personal experience, this statistic is totally true. The reasons? We will discuss this in this article.

After several years practicing as a business management professional. I have seen many cases of companies and organizations that failed and I have been able to analyze the causes that led to the business failure. Almost all cases can be grouped within these five causes to a greater or lesser extent. You will agree with me that knowing the causes of business failure will help you to avoid it as much as possible.

Here we write 5 causes of business failure

1: Do not make long-term strategic plans

This is probably the biggest cause of business failure in organizations. A project that focuses exclusively on the “here and now”, simply, has no future. Among other things, because by the time you come to realize that the market has changed, most of your competitors will already have more experience using the new principles and tools.

This culture of innovation should not be produced only in multinationals and large companies. In fact, the most surprising results occur in SMEs that adopt this reality in their strategic plans. In any case, it will be of little use to hire the services of an external consultancy service if you lack the disposition and conviction necessary to apply them. Remember that, ultimately, you are, to a large extent, responsible for the actions and results of your company. Continue reading: 5 Errors that prevent you from saving your money successfully

2: Conservative or ineffective marketing budgets

Most Marketing experts often complain that the budget contributed to their departments is always insufficient. It is also true that many of them are not able to understand the indispensable rules of investments and finances. So it is not surprising that, in many cases, marketing actions are ineffective.

On the other side, we have very little companies involved with the Marketing philosophy that consider that investing part of their resources in brand actions are a waste of time and money, therefore their marketing budgets are always insufficient for the results that they want to get.

Either of the two actions is wrong. You must know how to find the intermediate point, and give the marketing budget the necessary resources to be able to achieve the objectives that you are asked for, demanding in return, an adequate return to continue maintaining those investments.

3: Poor financial management of benefits

In general, the structures of most businesses depend too much on the financing of others. Own financing should not, under any circumstances, be less than 40% of the total financial resources of any project. The opposite would be more typical of operations of a speculative nature than of a serious investment with a long-term vision.

Similarly, many business owners literally “drown” the company in the first years of life. I usually recommend reinvesting the benefits, if any, for at least the first 5 years in order to capitalize the business enough. In any case, the most advisable thing is to invest in businesses with a margin of approximately 10 years, before starting to give back to the owners. If we want them to have the maximum chance of success

4: Lack of strategy in human resources and talent management

Many companies are unable to get the best professionals for their staff, mainly due to guidelines and personnel selection policies of the first half of the last century. A company that does not perceive its workers as its most valuable capital is in serious trouble.

Similarly, planning and continuously improving aspects such as compensation plans, promotions system or other rewards that make our workers feel comfortable and comfortable within our organization will help you improve your results. Keep in mind that your objective as an entrepreneur or manager is above operational work or field work. A leader leads so that others can achieve with their work the objectives of the organization. Never forget it.

5: Lack of investment in (RESEARCH + DEVELOPMENT + INNOVATION)

Many companies let their products and services stagnate. And over time they are overtaken by solutions proposed by more innovative companies. Even in traditional services, we find different and innovative business models and proposals. A serious problem is that our project seems “another of the same”.

Think of Apple and the recently deceased Steve Jobs. There are many companies that manufacture technology, but Apple always seems to contribute “something more” to its customers. Do not be afraid to be different. Quite often, “different” companies become benchmarks in their sector. And, to achieve this, investment in R & D & I is completely necessary.

I am sure that, after reading this information, you realize the enormous importance of avoiding these five mistakes and, perhaps, you feel overwhelmed by the enormous amount of work that may be necessary to achieve optimal performance in each and every one of these aspects. Do not be afraid, it is natural that you can not be an expert in each and every one of the varied fields that make up the business management. For that, there are, among many other valid alternatives, consulting firms.

The most important thing is that you know how to properly select your collaborating team. We can not pretend to be able to solve all the problems, that would be too pretentious on our part.

“Yourbigbusiness” also recommended you to read this article: http://www.wetakecareofbusiness.net/importance-of-a-business-plan/