10 Reasons Why Owner Managed businesses fail
Updated: Feb 9, 2021
Understanding the reasons why businesses fail, can be a helpful way of identifying where you are in your business lifecycle and helping you put plans in place to avoid becoming a failed business statistic. Over the past 50 years there have been many studies that look at the issue of business performance in a bid to to better understand why some businesses fail and others succeed. Reasons for business failure can be classed into two general groups, namely internal factors and external factors.This article focuses on owner managed businesses and looks at internal factors only as these are usually within the control of the business owner. So, here are our 10 reasons why owner managed businesses fail. 1.Lack of Industry Experience Every business has an industry and business environment in which it operates. In order to succeed, the internal resources and skills within a business must match the needs of the industry or environment in which the business operates. Lack of relevant experience or skills in a business can lead to poor organization of a firm and its resources and subsequently end up in business failure. 2.Inappropriate and Inadequate Financing Financing is the bedrock of any business growth, whether in the startup phase or in a later stages of the business life cycle. For many failures it is not just the lack of finance but also the use of inappropriate financing. For example, using short term sources of finance for long term projects can lead to trouble. Proper financial planning involves looking at various sources of funding and understanding the costs and benefits of each...