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7 Reasons Why Businesses Fail ...

By Aprille

Starting up a business takes more than just an idea and lots of money. Many people think that having these two things is all that is required to create a successful business and that it can be done in a short amount of time. Here are 7 reasons why businesses fail. Even though many businesses fail from a combination of the reasons below, it only takes one to really cause a new business to flounder a bit.

7 Lack of Investment in RND and in on-going RND

Lack of Investment in RND and in on-going RNDPhoto Credit: von_brandis

RND stands for Research and Development, which is often the driving force behind a successful start to many businesses. When there is little investment made into this part of a business, then the quality of the product or service tends to be rather weak. It’s also important to be prepared to develop something bigger and better later on if a competitor comes up with a product that surpasses your current design.

6 Poor Management

Poor ManagementPhoto Credit: *Cinnamon

Not being able to manage employees causes a lot of stress in the work place. Sexual harassment issues can be the downfall of even the most prestigious company. It’s best to work on having a good team that is able to function as an actual team and not a bunch of individuals. Managing your products or services for quality control is just as important as keeping employees in line. If your team ends up producing items of poor quality, then your reputation will go down with the workmanship.

5 Over-estimating the Market

Over-estimating the MarketPhoto Credit: Yrix

Thinking there is a huge market for the type of business you are creating can give you a rude awakening. I’ve heard of businesses sinking all their funds into a product that they just knew was going to be a huge success. The only part they didn’t count on was the small number of people that actually wanted the product. Also, if you have a product that is well-received, chances are competitors will begin to pop up out of the blue. You need to be able to effectively compete with these other companies, in order to stay on top of the market.

4 Incurring Too Much Start-up Debt

Incurring Too Much Start-up DebtPhoto Credit: doc rogers (ii)

There is always something that can be gone without in the very beginning. For example, you don’t necessarily need fancy outfits and expensive cars for employees to drive when first starting a business. Think about the important costs that must be dealt with initially. Once you’ve made a name for yourself, have an excellent product and team to product said product, then you can figure out how much extra money there might be.

3 Not Understanding What Customers Want

Not Understanding What Customers WantPhoto Credit: Tom Cooke「トム クック 」

Creating something that people want and making something that you think people want are two completely different things. Coming up with an idea for some fantastic invention that your friend is really excited about doesn’t necessarily mean that the majority of the population will be just as excited. It pays to look into what people are looking for and get an idea of how you can make something that will actually work.

2 Lack of Legal Protection

Lack of Legal ProtectionPhoto Credit: Rev. Xanatos Satanicos Bombasticos (ClintJCL)

Many ideas have been stolen over the years, due to a lack of signing the proper documents. Whether it’s a copyright, trademark, non-competition agreement, or non-disclosure agreement, figure out what you need to protect your ideas from being taken. Even the best of friends have stabbed each other in the back over a million-dollar idea.

1 Personal Short-comings

Personal Short-comingsPhoto Credit: doc rogers (ii)

Businesses can become so successful that the people running them get bored and have to find new forms of excitement. I’ve seen quite a few companies go quickly down the toilet due to drug use, alcohol abuse, and too much partying in general. Ruining a perfect reputation with shoddy workmanship or poor quality of work will send even the most profitable business in a downward spiral in no time at all.

Hopefully these 7 reasons why businesses fail will help you become more aware of all the possibilities for unsuccessful business ventures. For me, it always seems easier to avoid something when you know about it. Have you recently started a business? Do you feel you know what to look for in order to keep your business running as successfully as it possibly can?

Top Photo Credit: hans.gerwitz

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