Reasons for Business Failure

3 Key excerpts on "Reasons for Business Failure"

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  eBook - ePub

  Business Planning for New Ventures

  A guide for start-ups and new innovations

  • David Butler(Author)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  These are factors over which the entrepreneur or business owner has direct control or influence, and which therefore, should be addressed as part of the normal process of planning and managing the business; although of course not all of the solutions to developing problems may not be within the capabilities or resources of the owners or entrepreneurs. The reasons for failure are typically either financial, relating to funding, working capital, cash flow, or costs; or non-financial, relating to market research sales and marketing, product or service quality, and staff or management skills.

  Cash flow related reasons:

  ● Poor cash flow: possibly due to the business not having sufficient working capital to pay its day-to-day bills, but also commonly due to poor credit control and management of bad payers or slow-paying customers.

  ● When the business owners use their working capital to purchase fixed assets instead of arranging other finance.

  Budgetary planning and control:

  ● Poor financial planning, including unrealistic or over-optimistic sales forecasting, or lack of proper identification of operating costs and expenses when preparing budgets.

  ● Poor budgetary control and/or excessive spending: failing to monitor the actual income and expenditure against forecasts and targets.

  Cost-related issues:

  ● High overhead costs that cannot be covered by trading profits, including payment of excessive wages for staff that the business cannot afford or does not need on a full-time basis, high production or distribution costs, high bank charges and interest.

  ● Ignorance of the actual or true costs of business operations.

  ● Excessive drawings by owners or dividend payments from profit that leave insufficient cash available for working capital or expansion.

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  eBook - ePub

  Project Recovery

  Case Studies and Techniques for Overcoming Project Failure

  • Harold Kerzner(Author)
  • 2014(Publication Date)
  • Wiley

    (Publisher)

  When a project is completed successfully, we go through excruciating pain to capture best practices and lessons learned. Everyone wants to broadcast to the world what they did well on the project to achieve success. But the same is not true for project failures. For personal reasons, people are reluctant to discuss failures even though more best practices can be learned from failures than from successes. People fear that failures may be used against them during performance reviews.

  The list of reasons why projects fail is quite large. Yet most companies either do not recognize the symptoms of failure or disregard the symptoms when they do appear. Even if they see the symptoms, they do not know what actions to take. Typical reasons for failure include:

  • End-user stakeholders not involved throughout the project
  • Minimal or no stakeholder backing; lack of ownership
  • Weak initial business case
  • Business case deterioration
  • Business case requirements that changed significantly over the life of the project
  • Technical obsolescence
  • Technologically unrealistic requirements
  • Lack of a clear vision
  • New executive team in place with different visions and goals
  • Corporate goals and/or vision not understood at the lower organizational levels
  • Plan that asks for too much in too little time
  • Poor estimates, especially financial
  • Unclear stakeholder requirements
  • Passive user stakeholder involvement after handoff
  • Unclear or unrealistic expectations
  • Unrealistic assumptions, if they exist at all
  • Plans based upon insufficient data
  • No systemization of the planning process
  • Planning performed by a planning group
  • Inadequate or incomplete requirements
  • Lack of resources
  • Assigned resources that lack experience or the necessary skills
  • Resources that lack focus or motivation
  • Staffing requirements that are not fully known
  • Constantly changing resources
  • Poor overall project planning
  • Established milestones not measurable
  • Established milestones too far apart
  • Environmental factors that have changes causing outdated scope

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  eBook - ePub

  Managing Decline

  A Research Overview

  • Antti Sihvonen, Juha-Antti Lamberg, Henrikki Tikkanen(Authors)
  • 2021(Publication Date)
  • Routledge

    (Publisher)

  organizational failure as a:

  deterioration in an organization’s adaptation to its microniche and the associated reduction of resources within the organization. (p. 9)

  Due to the abundance of terminology and the close relationship between decline and failure, the terms organizational decline and failure are used interchangeably in this chapter. In doing so, they are taken to refer to the gradual deterioration of the configuration of the organization.

  According to Mellahi and Wilkinson (2004), organizational failure has several underlying assumptions. First, failure has negative consequences, even though the final outcomes of failure may be positive, such as individual or organizational learning. Second, the definition does not per se specify the causes of organizational failure. The definition thus takes into consideration both intraorganizational and environmental factors. At the organizational level, it takes into account the psychological and organizational (e.g., structural and processual) characteristics that might cause organizations to decline and fail. Explanations of organizational decline and failure need thus to be searched among an array of environmental, ecological, organizational, and psychological factors. Finally, by extension, Ucbasaran et al. (2013) define organizational failure of an entrepreneurial firm as follows:

  [W]e define business failure as the cessation of involvement in a venture because it has not met a minimum threshold for economic viability as stipulated by the entrepreneur. (p. 175)

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