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How To Avoid Business Failure? < Business Articles By Mast Business Directory


Studies have suggested that most of the failures that have led to the bankruptcy of huge corporations have been avoided easily. Researches have been done extensively suggesting what could have been done the right way to avoid business failures after analyzing hundreds of case studies of business failures. In this article, we shall discuss the reasons that lead to the failures of businesses, even the most established ones and the ones having a stronghold in the market. Every failure comes with an opportunity of learning something new. We shall also discuss what could have been the steps taken in order to avoid such failures.

Study your business failures

Usually, you tend to be impressed by the success stories of giant corporations and implement their marketing and financial strategies into your own business. Everyone wants to establish a business that is successful and does not fail due to any reason. But instead, if you look from another perspective, you can learn a lot from failures of someone. Learning about how a business fails and why does it fail can give you an opportunity to be on the top of that learning curve. You will learn not to make the same mistakes that have already been made before which has caused the dooming of large corporations. The thing is, if you talk to both: winners and losers, you will get a chance to understand the aspects of victory in the game in a better way. When you want to learn a specific recipe, you have to select from a range of cookery books. You select the one that is popular, or the one from which you have already studied. In a similar fashion, choose which failures to study wisely. You shall get a range; pick the best one; or rather the one which gives you direct and exact info to study upon. You shall get a particular kind of strategy mistakes that were most common.

Below listed are 10 causes that lead to failures in businesses and how to tackle and avoid them.

Business budget and planning

It is commonly noted that the owners who establish the businesses do not have enough money in their savings. This is applicable mostly to small and medium sized businesses. It is a good and commonly followed practice to save up to an amount such that you have six months’ worth living expenses and six months’ worth of expenses for your business also.

Relevant ads on mass media

Proper advertisements should be used. There should be creativity in the ads. It is seen that most companies whose businesses fail do not have enough advertisements. If the same pattern follows throughout the year, then it is harmful for your business. It is customary that people who form market for your business know about your goods and services. You can give the people information about any product of yours only through properly designed and frequent advertisements. More money should be spent on advertisements. This is the only way you can make your market say and establish hold on the market by informing others about your company. More success can be derived from the relevant ads that advertise your products.

Not enough sales

A sale is the only by which your company can acquire some revenue. The inflow of cash for a company comes only from sales department. Therefore the companies stress to sell more. The various sales incentive programs and the offers and discounts that the customers get are only an attempt by the company to sell more. Sometimes, the sales persons of the company are not at hat efficient. Due to some factors like communications barriers and lack of knowledge of how to sell and lack of experience, the companies are just not able to make enough sales. There should be more stress on the advertising part or you just need to lower the prices at which you provide goods and services to your customers. You need to be aware of more specials in order to generate sales.

Lack of staff

Sometimes, the company is just out of resources to handle the work they have been allotted on new projects. This is merely due to lack of staff. Companies tend to cut down on their human resources. Instead they try to generate more amount of work from minimum possible number of resources. This is done by companies without hiring enough number of staff. You should not hesitate to hire more staff in case you have got new work on projects that cannot be handled by existing number of employees. Your customers will have a bad impression on you and you shall not be able to make a reputation in the market in case your work gets delayed. Hence it is very much essential to hire appropriate number of staff as and when required.

Inappropriate budget

Sometimes, the companies do not have budget high enough. The budget of a business establishment should be such that they should be able to pay off everything. Buying something on credit with an expectation of achieving high sales and taking goods on credits will only increase your interest rates. The accumulated interest rates will only add to your burden of being liable for more payments. Paying off such unnecessary debts shouldn’t be at your disposal ever. Being a business owner you should have more money before you start a business or get a loan. A need for money in a business can occur anytime and you should prepare off as much as you can.


Some goods and services have their seasons. For example, you can sell umbrellas only during rainy season. Similarly, you can provide some services only in a particular season. These seasons tend to set off your business from the market. There is practically no way for you to acquire revenue in these seasons. But your business strategy should be such that there should be some form of sales in the off season timing as well. You should keep doing business. Idea of a shutdown of the business when it is out of season is bad. Going without business in the off-season isn’t going to do you any good. Generation of sales and saving up the money in these seasons is a must. The survival of any business in the off season periods is a very tough thing to handle and should be done very wisely.

Business expansion

Expansion of your business is a key factor for your business. It is very important that you expand your business and acquire more percentage of market shares. You should grab the opportunity of your business expansion whenever possible. Perhaps getting a business loan, coughing up your savings that have accumulated since years or even outsourcing your work to some other company will help.

Business image

It is very important to maintain a professional image amongst your peers in a business world. A good business image amongst peers shall help you obtain more clients and you are able to get more recommendations for your services and products. It is mandatory that you will achieve your sales target smoothly by maintaining a professional image in the market. Most companies lose a significant amount of their sales when they do not have a professional image maintained in the market. It is customary to win by getting best of everything for your business.

Trying to sell cheap

It is often seen that a failure is encountered when a company goes cheap on its products and services. Selling cheap products in the anticipation that you shall get mass sales is a myth. It should be noted that the quality of your product or the efficiency of your service deteriorates significantly when you make an attempt to make your goods and services cheap. Selling cheap products and availing cheap services can lead to mostly only one outcome. The people shall not be impressed and you lose out on your sales. Try to manage your prices such that the people can fell that your goods and services are not only of good quality, but also affordable. The word affordable does not necessarily imply cheap. Cheap products are known to be bought only by a lower segment of the market with whom you would not be successful at all in the business. You need to target the middle and the upper segment in your market. Do remember that these categories of people who need to be targeted do have a taste in buying things. You cannot just afford to lose your customers by selling cheap.

Violation of rules

Violation of the rules in the business is a serious issue. Obviously the punishment that is encountered due to such violations is heavy. Some businesses tend to bend the rules that are laid by the city council, state government or the federal government. This is the biggest reason as to why big businesses go out of business in a short amount of time. You have no option but to follow city and state regulations to still remain in business.

Thus in this article we have discussed some key aspects of how to avoid failures in business. Prevention is better than cure. So be cautious before making any business decision.

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