Transcript Why Do Businesses Fail?

Why Do Businesses Fail?
Tuesday, November 16, 2010
Overview
► Why
is understanding business failure
important?
► At
one point in your life you will:
 Own, work for, invest in, or depend upon one or
more business.
► By
analyzing businesses that have failed, we
can learn from their mistakes.
► Often,
the reasons that businesses fail is
well documented, and more obvious than
the reasons they succeed.
Lack of Skill or Knowledge
► Business
failure often results from a lack of
one of the major business skills:
 Marketing
 Accounting
► Why
marketing?
► Why
accounting?
Marketing
► Marketers
can read the markets, predict
demand, and select products that will be
popular.
► Marketing
experts provide promotional
ideas, creative advertising, and eye catching
displays.
► They
help sell the product.
Accounting
► Set
budgets and buying quotas that help
the business spend its money wisely.
► Negotiate
terms, pay invoices, factor in
costs, and keep financial records.
► They
ensure the business is profitable.
Expanding Too Quickly
► Some
businesses become successful so fast
that they try to grow too quickly without
having a plan or understanding expansion.
► When
rapid expansion occurs, businesses
often forget the reasons for its initial
success.
► See
Coca-Cola introduction of “New Coke.”
Lack of Capital
► Running
out of money is often the result of
failure to budget properly for the first year’s
operating expenses.
► Experienced
business people suggest having
enough capital in reserves to operate for
one full year.
Inability to Stay Competitive
► Businesses
compete using their product
mix, product quality, service, price, location,
reputation, or expertise.
► Creative
businesses will often find a way to
stay competitive, while marginal businesses
will go under.