Ten reasons why businesses fail
Guest post from the Intel IT Galaxy UK blog.
Jay Goltz, who owns five small businesses in Chicago, has written a great article for the New York Times listing the top 10 reasons why small businesses fail. Jay began his article by noting that the reason why small businesses fail is among the least understood aspects of entrepreneurship. Perhaps this is because entrepreneurs are reluctant to talk about it or there is a survivor bias amongst start-up success stories. The reasons cited by many owners are off the mark because if the they knew the real reasons, they might have been able to do something to fix what was wrong. Moreover, owners often blame someone else such as the government or bankers or their business partners rather than themselves.
From his own experience (including some business failures), the top 10 reasons why small businesses fail are:
- The math just doesn't work
- Owners who cannot get out of their own way
- Out-of-control growth
- Poor accounting
- Lack of a cash cushion
- Operational mediocrity
- Operational inefficiencies
- Dysfunctional management
- The lack of a succession plan
- A declining market
As you can see, Jay’s list does not include any of the usually suspects (eg the government, bankers or business partners) which may come in at numbers 11, 12 and 13. Moreover and at the end of his article, Jay said, “In life, you may have forgiving friends and relatives, but entrepreneurship is rarely forgiving. Eventually, everything shows up in the soup. If people don't like the soup, employees stop working for you, and customers stop doing business with you. And that is why businesses fail.”
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