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Why some businesses fail? March 29, 2009

Posted by frewon9 in Fail stuff.
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Why do businesses fail? What are some of the reasons that you think most businesses fail? Specifically, not anything general like poor planning, but what exactly causes them to go under? I am curious cause my website Jobs4Trade.com is up and coming(service trading and bartering) and One of our approaches is planning not to fail as well as planning to succeed. So what is a business killer?

1.Because the expenses over burden the owner, or the owner loses interest in the business.

2. Poor customer service
I hate those company website that use auto-respond (such as”We have received your message and we will get back shortly”) when I really & urgently need help.

And I got to wait like more than a day to get a reply. At least update the status to us everyday.

3. Changes in enterprise values are mostly determined by random variables. In other words, scientifically speaking the majority cause (i.e. the only statistically significant cause) of both business failures as well as business success is the same; it’s luck, either the good or the bad variety. Understanding this fact of life is fundamental to understanding mathematically efficient strategies for startup success.

because any business is a complex system operating in complex environment, it is impossible for entrepreneurs to influence the survivability of this system in any statistically significant way…factors such as the decisions of your competitors, the weather, the government, personal health, family circumstances, the global economy, your supplier situation or the preferences of your customers have a much bigger impact on whether your business will fail, as compared to anything within your control, such as the size of your marketing budget, your super excellent customer service, ip portfolio or the resumes of your management team.

To that end, from a startup perspective, the secret to entrepreneurship success lies not in the quality of your business, but in the number of businesses the founder invests her self in. Diversification always trumps incremental improvements as the more risk efficient strategy for entrepreneurial success, and there are no other important differentiators between successful and failed ventures other than luck.

4. In business there is never a scientific formula. Otherwise every business would copy each other!

A lot of it is luck, but then you make your own luck. Luck is defnatly not the biggest differentiator between successful and failed ventures.

SWOT analysis springs to mind right now. All that you have named above are threats to a business. With threats provides opportunities. It’s the business that can adapt best to the threats that will end up being successful.

lot of businesses fail because the owners don’t know how to manage a business. They might be great at the particular trade that they do but don’t know how to capitalise on their talent.

5. Venture failure is an interesting topic. I don’t really have any opinion on it one way or the other. The fact of the matter is entrepreneurship is mostly about luck, and as much as we all would like to believe that our own fantastical skills as business owners contribute to our success, in the large scheme of things, these beliefs are the symptoms of an illusion of control as well as hindsight bias.

Unfortunately, entrepreneurs rarely achieve equivalent levels of diversification..which is very sad for a lot of reasons.

6. While I agree that luck does play a role in business I cannot agree with the argument that it is mostly luck. Nor can I agree about there not being a scientific formula for the success of a business.

Innovation leads to quantification which is a scientific practice. Businesses that use this process CAN figure out the extremely complex formula for success and they do it often. That is all a franchise is.

Now some people do it better than others. Some franchises have seen more success than others… but it IS doable and minimizes the margin for error (which some would call bad luck)

Being an entrepreneur means figuring out your specific scientific formula for success, for your specific industry, for your specific customer base, for your specific commodity, for your specific workforce, and so on, and so on… the discovery of that perfect formula is never ending.

Some entrepreneurs figure that formula out better than others (even if it is subconsciously). The ones that do figure it out are the ones that are more successful.

With that I would say the main reason that businesses fail is the inability of the entrepreneur to figure out the success formula for their business. The reasons for that are variable – lack of quantification, inability to comprehend, pride, humility, distraction, ignorance, working in not on the business, and on, and on.

7. 1) There are many different types of “businesses”, you simply cannot say that the general term “business” relates to “every type of business”…so as there are different types of music (let’s say) there are various degrees of businesses – whether they are micro, small, medium, large, huge….whether they are simple, intermediate, complex…there is no “general-ality” (norm) in using the simple “word” business…

2) As for the term “failure”; it can be final, or it can be a part of the process of what many entrepreneurs term a “learning environment” – many successful entrepreneurs have “failed” many, many, times…and those that have done the necessary “learning” and “have gathered the errors of their ways and learned from then” – many people think that failure is a part of the overall equation that “may” eventually lead to success…

And “success” for some people is $8 per hour, and success for some people is $100,000 per month…

“Most businesses fail”; I guess that is a very true statement. But that is not the entire full context of an entrepreneurs journey – I believe that failure is definitely a “positive experience” for those people that understand the dynamics of “striving” for “what works” and “pushing forward to their dreams and desired lifestyles”.

And if a “business” is the entrepreneur’s 1st attempt; that failure ratio in most cases is nearer to 100% than it is to anything else.

8. management is something that tends to fail before a business. I also think business tend to fail without the right practices and ethics. Such as selling something for twice the price you can get it elsewhere. Screaming ad’s on tv, infomercials that say something is great when its really not then the customer service is horrible to boot. Something that could help businesses is having people behind you working with the same passion as you have. Ad’s that speak to the customer not at them and a customer service center that helps you whenever you need it 24/7, because not all of us are morning people.

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