#. why do 90% of businesses fail?
This topic is important and relevant in business, If people understand the question ‘Why 90 percent of businesses fail?’ at the beginning of their business journey, they will be able to deal with it. and if they take this likely, then they will have to pay a huge cost.
business is a very risky venture, within 5 years of start 90 percent of businesses shut down, the reasons for failure are very diversified and complex include, such as;
- poor management
- lack of market demand
- includes factor
- poor market demand
- insufficient funding
- cutthroat competition in the market
- the legal and regulatory system
- the economic condition of a country
Understanding why businesses fail? is very important for an entrepreneur, because it allows them to define potential challenges like;
- why the market rejects some products ?
- how the mood and needs of the market fluctuate ?
- how they can learn from a business failure ?
- studying more about business failure.
- eliminate the risk of failure in own business to build a long-lasting and successful business.
#. Why policy maker and government should also focus on this problem?
For government and policymakers, it is very important to focus on this problem, because businesses are the engines of the country’s economy. the business employs many families and individuals and if the business fails they also suffer a lot and the GDP of the country also goes down due to strict government policies. Many startups are not able to survive due to high taxes and duties and they shift their business registration to other tax-free countries like U.A.E. and Singapore.
This causes the government huge losses because the government can not take taxes from foreign registered countries, that’s why the government should make the country business-friendly and the government should support startups in expansion and quality control.
#. shocking causes of business failures :
- 1. lack of market demand
- 2. poor management
- 3. insufficient fund
- 4. economic condition
1. Lack of market demand :
Many businesses get failed due to a lack of market demand. market demand is created when consumers are willing and able to pay for the product. it is an important point because it provides a clear indication of sales of products or services in the market area. if the market demand will be low, then the growth opportunity of the market and expansion will get tough in the market.
If the market demand will be low and competition will get decreased due to high supply, the manufacturers and retailers will start dropping their prices and start to give huge discounts, which will lead to massive losses to manufacturers and retailers.
2. Poor management :
poor management is a major cause of business failure for many companies. poor management can affect the company’s budget, employee turnover, and overall profits. it starts taking place in companies when there are no visions and goals of leadership due to a lack of clarity in business, they want something else but produce something else as a product in the market.
business failure can also be caused by ineffective and weak leadership this also comes under poor management.
3. Insufficient funds:
insufficient funds are one of the most common reasons for business failure. but the most common reason for insufficient funds in the startup world is cash burn in marketing and customer retention. many startups these days face huge losses due to cash burn. they are spending a lot more than their profit. this is the best example of insufficient funds but there are some other reasons also for insufficient funds.
like: working capital is used in business to cover day-to-day expenses and financial obligations. if suddenly demand increases in caused then the savings of a company get invested to revive the machinery and take it on working positions again.
Sometimes failure causes 5 to 10 days of backlog in a factory after machinery failure because machines are used for backups and don’t work on their fall capacity and supply chain breaks for sometimes it causes a huge amount of debt to get trapped in the supply chain of the factory. These types of situations can cause huge insufficiency of funds in the company.
4. Economic condition :
economic conditions of a country can have a significant impact on business failure. some ways in which economic conditions can affect a business are :
- 1. spending power of the consumer –When you are starting a business when the economy of the area will be strong, consumers tend to have money to spend which can lead to an increase in demand for products and services. during an economic downturn, consumers may cut back on their expenses, which can lead to decreased demand for business products.
- 2. interest rates of the bank – interest can impact business in several ways, higher interest rates can make it more expensive for businesses to borrow money, which can limit their ability to invest in growth opportunities. lower interest rates can make it easier for businesses to access credits and invest in growth.
- 3. inflation rate of the country – which is the rate at which prices for goods and services increase over time and can also impact businesses. when inflation is high businesses will raise prices to increase their profit margins, which can reduce demand for their products and services.
- 4. exchange rate -a business that operates internationally, can be impacted by exchange rates, which determine the value of the currency another fluctuation in the economy can cause a weakness of currency which can lead to an impact on business profits and affect their ability to compete in the global market.
So these are the major reasons why 90% of businesses fail and how it can be prevented by market research and market condition.
#. Conclusion: (How to avoid the pitfalls of business?)
to succeed in business it’s important to have a clear strategy for your company. This includes; understanding your target market, identifying your unique value proposition, and developing a plan to differentiate yourself from competitors.
Additionally, you need to be agile and adaptable to changing market conditions and trends, and customer needs. It’s also essential to focus on building a strong team, cultivating a positive company culture, and investing in yourself. It is important to maintain a strong financial foundation, cash cashflow, and cost-cutting. investing in growth opportunities by prioritizing key areas in business can increase their success chance.
“Failure is life’s greatest teacher and the only way we truly fail is to learn nothing from valleys we experience.” there is a famous quote from ‘Albert Einstein‘ is “Anyone who has never made a mistake has never tried anything new.”
Risk Management Framework: (5 Revolutionize risk management strategy for your business)