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    Entrepreneurship Qno2

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    Asad tareen
    The document discusses key factors that can cause business failure if not avoided, including starting a business for the wrong reasons, poor management, insufficient capital, poor location choice, lack of planning, and overexpansion. It provides examples and explanations for each factor.

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    © All Rights Reserved
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    Entrepreneurship Qno2

    Uploaded by

    Asad tareen
    11 views2 pages
    The document discusses key factors that can cause business failure if not avoided, including starting a business for the wrong reasons, poor management, insufficient capital, poor location choice, lack of planning, and overexpansion. It provides examples and explanations for each factor.

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    Entrepreneurship

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    The document discusses key factors that can cause business failure if not avoided, including starting a business for the wrong reasons, poor management, insufficient capital, poor location choice, lack of planning, and overexpansion. It provides examples and explanations for each factor.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    11 views2 pages

    Entrepreneurship Qno2

    Uploaded by

    Asad tareen
    The document discusses key factors that can cause business failure if not avoided, including starting a business for the wrong reasons, poor management, insufficient capital, poor location choice, lack of planning, and overexpansion. It provides examples and explanations for each factor.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Better success rates notwithstanding, a significant percentage of new businesses do fail.

    Expert
    opinions abound about what a business owner should and shouldn’t do to keep a new business
    afloat in the perilous waters of the entrepreneurial sea. There are however key factors that if not
    avoided will be certain to weigh down a business and possibly sink it forevermore.

    1. You start your business for the wrong reasons.

    Would the sole reason you would be starting your own business be that you would want to make a
    lot of money? Do you think that if you had your own business that you’d have more time with your
    family or maybe that you wouldn’t have to answer to anyone else? If so, you’d better think again On
    the other hand, if you start your business for these reasons, you’ll have a better chance at
    entrepreneurial success:

    You have a passion and love for what you’ll be doing, and strongly believe — based on educated
    study and investigation — that your product or service would fulfil a real need in the marketplace.

    You are physically fit and possess the needed mental stamina to withstand potential challenges.
    Often overlooked, less-than-robust health has been responsible for more than a few bankruptcies.

    You have driven, determination, patience and a positive attitude. When others throw in the towel,
    you are more determined than ever.

    Failures don’t defeat you. You learn from your mistakes, and use these lessons to succeed the next
    time around. Head, SBA economist, noted that studies of successful business owners showed they
    attributed much of their success to “building on earlier failures;” on using failures as a learning
    process.

    2. Poor Management

    Many a report on business failures cites poor management as the number one reason for failure.
    New business owners frequently lack relevant business and management expertise in areas such as
    finance, purchasing, selling, production, and hiring and managing employees. Unless they recognize
    what they don’t do well, and seek help, business owners may soon face disaster. They must also be
    educated and alert to fraud, and put into place measures to avoid it.

    Neglect of a business can also be its downfall. Care must be taken to regularly study, organize, plan
    and control all activities of its operations. This includes the continuing study of market research and
    customer data, an area which may be more prone to disregard once a business has been
    established.

    A successful manager is also a good leader who creates a work climate that encourages productivity.
    He or she has a skill at hiring competent people, training them and is able to delegate. A good leader
    is also skilled at strategic thinking, able to make a vision a reality, and able to confront change, make
    transitions, and envision new possibilities for the future.

    3. Insufficient Capital

    A common fatal mistake for many failed businesses is having insufficient operating funds. Business
    owners underestimate how much money is needed and they are forced to close before they even
    have had a fair chance to succeed. They also may have an unrealistic expectation of incoming
    revenues from sales.

    It is imperative to ascertain how much money your business will require; not only the costs of
    starting, but the costs of staying in business. It is important to take into consideration that many
    businesses take a year or two to get going. This means you will need enough funds to cover all costs
    until sales can eventually pay for these costs. This business start-up calculator will help you predict
    how much money you’ll need to launch your business.

    4. Location

    Your college professor was right location is critical to the success of your business. Whereas a good
    business location may enable a struggling business to ultimately survive and thrive a bad location
    could spell disaster to even the best-managed enterprise.

    5. Lack of Planning

    Anyone who has ever been in charge of a successful major event knows that were it not for their
    careful, methodical, strategic planning — and hard work — success would not have followed. The
    same could be said of most business successes.

    It is critical for all businesses to have a business plan. Many small businesses fail because of
    fundamental shortcomings in their business planning. It must be realistic and based on accurate,
    current information and educated projections for the future.

    6. Overexpansion

    A leading cause of business failure, overexpansion often happens when business owners confuse
    success with how fast they can expand their business. A focus on slow and steady growth is
    optimum. Many a bankruptcy has been caused by rapidly expanding companies.

    At the same time, you do not want to repress growth. Once you have an established solid customer
    base and a good cash flow, let your success help you set the right measured pace. Some indications
    that an expansion may be warranted include the inability to fill customer needs in a timely basis, and
    employees having difficulty keeping up with production demands.

    If expansion is warranted after careful review, research and analysis, identify what and who you
    need to add in order for your business to grow. Then with the right systems and people in place, you
    can focus on the growth of your business, not on doing everything in it yourself.

    Thinking you can do it all yourself.

    In the beginning, it’s common to think that no one can do the job as well as you can. You know your
    products inside out, and are the only one who truly has the passion to make the business succeed.

    But this is not only a recipe for burnout, it can actually significantly impede your success. Having a
    knowledgeable, experienced consultant or mentor can give you much-needed objective perspective
    on your business and market.

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