“Why businesses fail” is an important question for entrepreneurs to consider because it isn’t an easy problem to snap back from when you run up against it. If everything is a lesson waiting to be taught, failure is one of the hardest lessons there is to learn, even as valuable as it is.
Success comes at a cost. Read about the top reasons behind business failure and why certain businesses fail to survive.
Why Businesses Fail: Seven Reasons
There is a long list of reasons for why businesses fail. Some may apply to you. Some may be completely foreign to your business. For the sake of brevity, let’s take a closer look at some of the more common reasons that impact most businesses.
A Failure To Commit
Commitment failure in business is commonly associated with promises made to existing or new customers, which are then not fulfilled as agreed upon. On their own, each of these may seem like a small deal and, on their own, they usually are. But false promises from a company that begin to pile up can ruin that company’s reputation, no matter how bulletproof they feel.
Business Loss Due Commitment Failures
There are many reasons for a decline in business, but losses due to a failure of commitment can be disastrous. Imagine a situation where you are about to close a deal. You have hired staff to ensure timely delivery of goods or services. There may be raw materials purchased due to a tight delivery date and, suddenly, the customer says “No” to the deal.
Your business may encounter huge losses, leading to a lot of other related troubles. Read on, and let us make you aware of the possible threats of doing business under these circumstances. Business commitment failures may or may not be financial, but they surely impact the financial structure of any business.
Also Read: Inside the Brain of a CEO
Customers Using Unethical Practices
This is actually one of the most severe points at which many businesses fail. I can say this because almost every business faces a situation where the customers stop payment due to unethical practices on their own part.
Customers may use unethical practices to get great discounts on final prices or ask companies to do research and get proposals in return. Later these proposals are shared with other vendors, making them essentially worthless, as lower prices are offered so customers choose the better deal.
There are times when work is done as per commitments made, and the customer may want more done, but without having to pay. In this case, they may try to keep your money in an attempt to push you to complete the required task.
Business and Emotions Clashing
Business is ruthless and harsh, usually in some unpleasant combination or another. Letting your emotions guide you may force you out of business at some point if you don’t keep it in check.
The business world doesn’t understand emotion, and your competitors are eager to eat up your share. They are hungry for business and will only care about their own companies. So be like them to survive – otherwise, be ready to get wiped off the market.
The Myth Of Loyal Customers
Creating loyal customers is a myth. Once and for all: there are no loyal customers in the market. Anywhere. In any market. None.
Everyone is looking for ease. Your customers are with you until they get something better. Keep giving the best value to your existing customers to ensure that they remain with you. And if they leave even after you gave them everything, there wasn’t anything you could have done differently.
Also Read: 8 Ways to Conquer Self-Doubt
Poor Quality Control
Poor quality control is like giving slow poison to your business. After all, it may be hard to make customers, but nothing will ever be easier than losing them. You must ensure you are maintaining the highest-possible quality, and work hard to keep improving it.
Committing To Only Your Best Customers
This might sound odd, but many business failures can be traced right back to those business’ best customers themselves. In long term contracts, companies may work with certain customers they prefer for one reason or another. Maybe the clients pay on time every month. Maybe they just agree with you on a personal level. These customers can become your primary source of income. This is extremely dangerous.
At this point, in the case of a misunderstanding, your business could stand to lose its biggest income source all at once. If you’ve let your other clients slack in the meantime, you could be left without a paddle as you suddenly lose thousands, overnight.
Never rely on any single source of income. Try to make many small customers along the way, and keep them satisfied so that all of your income sources continue at all times.