Business Failure

Internal causes of Business Failure:

External causes of Business Failure:

Lack of planning – A thorough business plan is needed, as it shows the direction of the business and pre-empts any problems in advance Cash flow problems – focusing on profit and running out of cash. (e.g investing too much in fixed assets, overtrading, over-borrowing, external factors) Lack of funds – New businesses struggle to attract funding because they do not have a trade history and are too risky for investors. Relying on a narrow customer base – relying on a small number of customers, if they lose these customers sales will fall and survival is very difficult. Marketing problems – launching products that fail to meet customer needs, using inappropriate pricing strategies, investing too much in advertising campaigns etc Failure to innovate – being reluctant to adopt new technology. Lack of business skills – entrepreneurs have to be creative, numerate, motivational and good decision makers. Poor leadership

Competition – either bringing out superior products, charging lower prices, may be a larger more powerful business and use destroyer pricing to drive smaller businesses out Changes in legislation – e.g. the smoking ban, Changes in consumer tastes – often in industries with fast moving changes in tastes e.g. fashions Economic conditions – the financial crisis of 2008, cuts in the public sector resulting in job losses and therefore less disposable income, resulting in lower demand for non-essential products and services. Other changes include interest and exchange rates. Changes in market prices – some businesses have little control over the prices they change