Top 10 Causes Of Business Failure

Top 10 Causes Of Business Failure

It may be that your company has a hundred employees or that it has five, but the main causes why a business fails they are the same and have to do mostly with negligence or management failures.

As entrepreneur It is convenient for you to know and understand which ones they are to act more wisely when building your company.

  1. Not having a sales strategy
    Many entrepreneurs They start their companies with great enthusiasm, excellent products or services and even good financial backing, but they forget that to be successful you need to know how to sell and sell effectively.

    They lack a good sales strategy that guarantees them profits and therefore their expenses are soon higher than their income.

    advice: If you don’t consider yourself a natural salesperson doing this job, be sure to hire the best salespeople.

  2. Make indiscriminate use of your credit cards
    Credit cards can be the difference between success or failure of a business. We know that a well-used card can be an excellent tool for leverage a business taking advantage of bank credit. But a runaway card can be the perfect formula for inflating costs and getting tangled up in debt.

    advice: use your credit cards only for occasional expenses, travel or expenses that you can pay immediately. If your credit card is out of control, it should be an urgent alarm for immediate action to avoid falling into debt.

  3. Not having a monthly spending budget
    Messy management or the omission of a monthly spending budget can be a risk factor for your business. Shopping blindly, spending at will, or exceeding the stipulated items for each purpose will soon put your business on the line.

    Equally dangerous is having a budget but not being disciplined in its management and the consequent application of expenses.

    advice: Prepare a monthly expenses budget and stick to it disciplined as this will be your guide to a smart investment.

  4. Excessive local or office costs
    Many times in an effort to find the best points or locations for your business, the mistake is made of paying excessive prices for premises or offices that often do not return in sales what they are really worth.

    Not considering market variations according to different times or consumer behavior can severely affect your costs and affect your company.

    advice: when choosing a business premises you must do a thorough study that allows you to obtain a cost-benefit estimate that really represents profits. Otherwise, it is worth considering a more convenient point.

  5. Homeowners without salary
    Another factor that leads many companies with great potential to bankruptcy is the lack of discipline of their owners in assigning a salary. They tend to spend more than their income, they overspend, they buy anything that comes to mind without consulting the budget, they buy new cars, unnecessary trips or meals that do not represent any profit in terms of business.

    advice: as an owner you must assign yourself a salary that goes according to the growth of your company. Pretending to earn more than your company generates is an illusion that lasts for a very short time.

  6. Mismanagement of the loan portfolio
    Granting too many credits or expanding your portfolio without controlling arrears is another of the critical factors that can affect your business. Selling on credit is an excellent tool that promotes business growth, but this must be granted within the limits of your capital and the credit that your same suppliers grant you. Failure to do so is often the perfect formula for business failure.

    advice: get adequate advice on how to intelligently manage your loan portfolio to maintain limits and ensure that this will be a profit strategy and not the opposite.

  7. Unnecessary staff payroll
    Personnel management is another of the determining factors for the success or failure of your business. From the beginning, you must be very careful and smart when hiring staff. You must evaluate your hiring capacity as well as the working conditions you offer according to the laws that exist in your city and avoid that your payroll grows indiscriminately or that your wages are out of the market.

    A poorly managed payroll or overstaffing can wipe out your profits.

    advice: Only hire the required staff who can bring true value to the company in terms of profitability. Consider all the expenses that have to do with hiring a person such as: social security, labor liabilities, legal benefits and other advantages so that you can clearly see how much that hiring costs you.

  8. Abusing bank loans
    The abuse in the management of credit for the growth of your company can take you to an undesirable state. Loans can be good as long as they are under control and used for investments that return a good enough percentage to pay them off and also make a profit for the business.

    However, when you overdo the loan application or misuse the credit that your providers offer you, then you will be leading your company into debt from which it can cost you too much to get out.

    advice: manage the credits that they grant you prudently. Cancel on time and keep your good credit record for when you really need it.

  9. Comfort
    Probably the No. 1 cause of why they go bankrupt. Comfort has to do with indifference, with laziness, with lack of planning, with the presumption of believing that circumstances cannot be changed. Click the link below if you want to know more about how comfort is an enemy of successful businesses.

    advice: commit to your business and decide to work like never before and be the best at what you do.

  10. Lack of vision
    Vision is the ability to see beyond what is possible. It is dreaming, it is believing that the impossible can be achieved. Vision is the ability of a leader to transform his limitations into big projects. Many business they perish for lack of vision of the leaders who direct them.

    advice: your business It will be as small or as big as you want to make it. Become a visionary and work knowing that each step in the present brings you closer to your future.


These steps may seem trivial to you, or you may have heard them before. However, the important thing is not only to know it but to take action so that your business does not fall prey to any of these factors.

Being an entrepreneur has many advantages and can fulfill you in incredible ways, but it takes a lot of work, effort and intelligence. And you, what would you say is your weakness in your business? What immediate actions will you take to improve those weak areas?

advice: Follow us on facebook by clicking here and let’s stay in touch!

More business ideas:

You can bookmark this page