Causes of Business Failure: 3 Major or Top Reasons of Business Failure

Business works in an environment dealing with various entities of this environment. Everyday business has to deal with customers, suppliers, financers, dealers, government, state authorities, political affairs etc. All of these factors have significant influence on the business. All these can affect business in various ways. If any of these factors goes wring, it can create harm for the business.

Here, in this article, all the effects and consequences of these factors on business are explained in detail. All of these factors can cause business failure of sickness for a business. Everything can not be always correct for us, we have to take care and take preventive steps against such factors.

Causes or Reasons of Business Failure

Financial Crisis

  • One of the major causes for business failure is financial crisis. May business entities may be facing financial problems. If you don’t have enough money to put in to the business, it is difficult to run the business. Finance works as blood for the business which keeps it circulating and working smoothly.
  • Due to downturn in the economy many organizations may have liquidity problems. Due to lack of finance, they can not carryout their production, human resources management, marketing, speculations etc.  Financial crisis can directly cause a business failure for business entities.

Fierce Competition

  • Competition is also a major factor affecting business. Competition is really fierce in open market. To survive in the competition, you need to be innovative and different constantly. You need to be aware about competitors’ movements. If you fail in fighting with your competitors, you may fail in the business.
  • Many a times, competitors may have advanced materials and advance process than us. They may have better technology than what you have.
  • If you can track their steps and do better than them, you may fail in your business. It is very important to be on line with competitors.

Lack of Innovation

  • Today customers always demand something new. If you provide them great experience with constant innovation in your products & services, they are happy. Otherwise they will move towards your competitors. You need to provide them very innovative products with great ideas to maintain them. We have many examples business entities failed because of lack of innovation.
  • Every product has certain life cycle. If you don’t take corrective action when your products start falling, you are gone from the market. Innovation is the inevitable need for a business entity.

Feeble Marketing

  • Marketing counts a lot in any business. You need to come in to eyes of your target audience. You need to position your self in to minds of your consumers. If your marketing efforts are not enough, you may have to face many hurdles. You have to convince people how you are better than your competitors. Marketing is the only way to attract them, and convince them about your ability and your products.If you can not market your products, no one will come to buy them.
  • These are some of t he causes of the business failure. There are many other causes like natural calamities, governmental changes, civil war etc. can harm the existence of business. Strong teamwork is also required to sustain a business for a long period of time. If you have feeble team and don’t believe in team work, they may cause the business failure as well.

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