Reasons For Business Failure

There are two major areas of managerial incompetence that lead to business failure. The first is lack of skill or ability in sales and marketing. Fully 48% of businesses that fail do so because the business cannot sell enough of its products or services to survive. With declining sales, cash flow, which is the oxygen to the brain of the business, soon declines to the point where the business collapses. In a broader sense, this is why people fail personally as well. They fail to generate enough income to cover all of their expenses. Eventually they run out of cash because they do not earn enough money to pay for their living expenses.

The second reason that businesses fail is because of poor cost control. The business may be selling and generating sufficient revenues on the front end, but they are losing so much on the back end that they go broke anyway. Again, this is a major reason for personal financial failure. No matter how much a person earns, he must be able to get his spending under control. If not the relationship between income and expenses gets so far out of balance that his financial life collapses.

Both sales and revenue generation in business on the one hand, plus cost controls and cash flow analysis on the other hand, require experience. If you are serious about becoming financially independent, you have to become skilled in both areas.

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