13 Reasons Businesses Fail
Why Do Businesses
Fail? Ask yourself these questions
venture capital for business expansion call us every day. All too often,
the perceived need for additional funding is really a need to become more
efficient, using resources already available, and increasing marketing
According to Corporate
Economist Philip B. Nelson, there are 13 "Bad Luck" causes of
financial trouble directly attributable to management (and government).
Omission (i.e. lack of foresight, anticipation or experience)
- Lack of planning
to cover increasing debt or interest rates [23.3%]
- Changes in the
market place (nothing stays the same) [66.6%]
changes to the market that bypass your company [13.3%]
- Changes in the
physical environment (often occurs slowly) [3.3%]
Disruption of key relationships (loss of key clients, financing, etc.)
Commission (yes, it's a "do it to yourself project")
- Over expansion
(too many [government] employees, offices, products) [66.6%]
- Over leverage
(works great during expansions, remember the "bubble") [53.3%]
- Over diversification
(what business are you really in and what makes the money?)
- Over dependence
on one customer, supplier, product, etc. who suddenly disappears or
changes the relationships [13.3%]
- Inadequate control
systems (does your accounting, manufacturing, etc. system give you the
answers you need right now?) [80.0%]
- Dissension among
the management team (it is a team isn't it?) [40.0%]
- Has the business
reached its "level of incompetence"? [46.7%]
- Lack of Leadership
by the chief executive. One of my favorite books is entitled, "If
I'm in Charge, Why is Everyone Laughing?". [83.3%]
- Now that "We
have met the enemy and he is us", how can we recover?
How to solve
existing financial problems and prevent new ones
- Avoid denial of
the problems. This is vital. Early recognition of the symptoms of a
sick company, and willingness to act, is the best hope for an early
and successful recovery.
- Don't let yourself
fall for "escape hatches" and last minute "saviors".
- Be willing to
put the survival of the business above personal agendas and competing
- Get professional
help early and often. We recently helped a client convert over $3 million
in debt to equity, and then refinance the one remaining loan in its
- Do everything
possible to control all costs. Can you automate, use part-time help,
re-negotiate rents, restructure responsibilities, out-source production,
- Find ways to use
current assets (both people and tools of the trade) in a more efficient
- Explore ways to
increase sales. Is there enough margin to allow expansion of your sales
efforts? Many companies make the mistake of cutting sales commissions
and incentives during tough times, when just the opposite is called
- Measure the effectiveness
of your advertising? Does your advertising follow your marketing plan?
Are advertising dollars quantifiable?
Know "when to hold 'em and when to fold 'em".
do not run away from the problems. If, after a thorough evaluation, you
determine that you really do need
expansion capital , there are numerous ways, actually more than 30,
besides formal venture capital, to go about obtaining it.
How is My Business Doing?
your goals, and avoid the disasters!
- Learn what the
experts say is critical about your business and its survival. What are
the Financial and Management issues you should know about?
- Learn the key
elements that affect liquidity, growth and profitability.
- Which financial
control systems, management methods, and information control systems
determine your success or failure?
- Is management
multiplying or dividing your business equation?
- What about the
CEO's leadership? Key Managers? The Board of Directors?
- What about over
diversification, over leverage, and over expansion?
- What about the
external factors of banking relationships?
- How is your legal
posture and your legal protection?
- Do you have a
single vendor or single customer dependence?
- What about changes
in the market, technology, or environment?
- What financial
calculation can you use to get a 95% accurate picture of financial health?
- When do you pat
yourself on the back, and when do you call for help?
To get the answers
for your business, order this important and in-depth
Business Fitness Test . Designed by experts, it's based on thousands
of company profiles. You will find out whether to breath easier or call
911. As an added benefit, you receive a complete book of financial analysis
tools to better manage your business.
goal is to provide you the best funding tools available and to get your
Venture Planning Associates,
of the hundreds of sites offering business plan products and services, your VenturePlan
site is among the best, if not the best. "
Mike Rischard CPA, President, Agilecor
we received first round funding ($5 million) the VC firm asked us to show
how our financial models were created. They wanted to use OUR TEMPLATE (which
we developed from the 7 Venture Capital Reports) to help them evaluate alternative
scenarios for their portfolio companies!" Michael
.Lay, CFO, e-Commerce Internet Company
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