Top 36 Reasons For Business Failure

36 Reasons for Business Failure

You may hear the word “thirty-six” by many people. So what does this “thirty-six” word mean? It is mainly used for the negative connotation, such as thirty-six types of people; you have thirty-six types of tantrums; you are making the same mistakes thirty-six times.

Now I will tell you about thirty-six reasons for business failure, which are those thirty-six reasons that are creating negative growth in your business. Let’s discuss the ideas.

Top 36 Reasons For Business Failure

1. Building something that people don’t need

You created some products that are users unfriendly, or you ignored the customer’s need. Then why will they buy your product?

People buy things when they must need products. So if you think that your product is very customer friendly, but your customer didn’t find them that much useful, then there will be no reason customers will buy your products or take a risk to pay you to advance.

So building something that people don’t need may decrease your business growth.

2. Hiring poorly or not the right team

Some times wrong hiring may cause you disruptive, harmful, costly, and annoying. Cheap recruitment may costs you badly.

If you don’t have the right workforces or your team is not ready yet, you will not be able to control the business anymore.

You will only remain as an operator, and you can’t be a controller of your business to raise it properly. That may costs you a lot.

3. Lack of focus

Maybe you’re working too much, producing too many products, visiting too many territories, or visiting too many markets, but you don’t have complete focus on your business. That will be a big reason for your business failure.

So no matter how much you’re working, your lacking of attention may decrease your business growth.

4. Stuck in legal issues

If you are not able to follow compliances and legal issues that will become one of the biggest reasons for your business failure.

  • You have to regulate government compliances properly such as
  • What will be the trademarks of your business?
  • What are the details business certifications you may need
  • What types of legal papers do you need to complete?
  • What should be written in the contract papers? or
  • Where to sign in the contract papers?

If you can’t regulate these issues, you may risk your business.

So be careful about agreements and legal issues.

5. Failure to execute sales and marketing

If you are not able to make the below points, you will bring loss to your business. These are-

  • If you can’t bear the right scheme of marketing
  • If you can’t up-sell, cross-sell, or re-sell the product
  • If you don’t have the right pricing strategy
  • If you can’t do proper marketing
  • If you’re using expensive marketing methods such as advertising on television, FM radio,
  • If you can’t measure digital campaigns properly
  • If you can’t bring customer acquisition cheaply.

6. Bad location

Sometimes the right place becomes the wrong choice. It will be the wrong choice of the situation if you want to open a small restaurant in front of a big mall or restaurant. Then if you are hiring or buying a restaurant with a big budget that will impact your PLA or profit and loss account. If the total location expenses are more significant than your full monthly or yearly turn over, it will lead to your business loss.

7. Getting outcompeted

Not tracking competitors or too much competition may cause losses to your business. If your business ideas can be easily copied or anyone has done it before, if you enter late in that business without understanding the competition strategy, or if you don’t build the competitive advantages, then your business will face loss.

8. Not having the right partners or co-founders

If you choose the wrong partner or wrong co-founder, it will hamper your business. You should select such a co-founder or partner that will support you whenever you fail. You both must have complimenting strength like if your partner is the action man or idea man, then you become the people man or process man or if your partner is the people, man or process man than you should become the action man or idea man.

If your co-founder or partner is doing the same as yours, then your business will not improve. Choose someone who will give the best in their sector.

9. Cash burn or not been able to raise money

If there are more cash burn and less fundraising from the beginning, then you may face loss in your business. If there is not adequate money in your business, then there is no chance of profit in your industry.

10. Not being able to execute a pivot or not learning from your failures

If you can’t build an improvement cycle, then you will face loss. All the big companies or brands which bring the first product is not their last product. They bring pivot, J- curve.

Pivot: Pivot is if a brand or company makes any fundamental changes to business by doing market researches. As their products are not able to complete the needs of their customer, they change the outcome. Companies will continue to pivot as they discover new opportunities or break the business according to customer demand. The main focus of pivot strategies is to attract new types of customers.

J- curve: J- curve starts from the down and goes up according to your work growth.

Always learn from your failure, evolve the brand, and still do proper observation.

11. Raising too much money

If your business has less margin but more cash flow, in that case, you will face loss in your industry. Don’t collect or loan so much money in less margin business. If you bring a lot of money, you cannot properly utilize all the money, or you can spend the money in some unnecessary sectors.

12. Lack of planning

Without planning the whole journey, if you enter the business, then you may face significant losses. If your business plan doesn’t include a mentor, coach, guide, or trainer, you don’t have an ideal business plan. Without a mentor, coach, guide, and Trainor, your business plan may not succeed.

13. Chasing investor not user

Some people make mistakes by focusing on investors. But if you give your full attention to the user or the customer, you will never require any investor. You should consider the entire priority of what your user or customer wants. The user or customer will give you the advance money, which will help you in your start-up. So, chasing investors will be the wrong decision for your business.

14. Leadership/ strategic failure

If you can not make a proper strategy or cannot correctly understand the policy, then your business will face loss. There are fifty types of plans for the company. You have to understand every standard. You can also get the information about the rules from ‘Everything About Entrepreneurship.’

15. Wrong partner and alliances

If you choose the wrong partner and alliances, then it will be a bad decision. If you have a weak vendor, contractors, investors, partners, partnerships, strategic partnerships, cross-promotion partners, barters partner, then we will face loss in your business. If your supplier is weak, you will get an ineffective product. So always try to choose partners and alliances wisely.

16. No differentiation

Differentiation is an essential point for your business. You have to distinguish why customers will come to your company. What differences you have that no one can give it to him, why they will choose your product over much other merchandise from markets, what value you give him to accept you, and reject it other product or companies. If you cannot see differentiation about your customer needs, you cannot prosper in your business.

17. Wrong business model

Another wrong decision is if you create a faulty business model. Business usually depends on two points- method and model. Colonel Sanders, the founder of KFC, Richard, and Maurice, the founder of Mcdonalds, Caleb Bradham, Pepsi, A.G Candler, the founder of Coca-Cola, build the ideal business model that still no one can take it over. So make your business model as much durable as you can.

18. No revenue model

The business model’s primary focus is scalability, and the revenue model is all about income possibilities. If your business is like the income is late or no income, then the revenue model will become weak, which may cause the closure of your business.

19. Over expansion

Expansion without the right margin is committing suicide because scale kills. Try hard to start up your business correctly; don’t try to focus only on development.

20. Bad debts

Bad debts mean suppose you are giving a mortgage to someone who will never return your debts. Every penny is significant. So if you have bad debts, then there is no chance to succeed in your business.

21. Macroeconomic factors

Macroeconomic factors are those that you cannot control, such as earthquakes and pandemic outbreaks (coronavirus). It is not easy to manage coronavirus because we still do not have any vaccine or cure. So, it will impact our whole economy.

22. Slow execution

If you don’t know how to execute or how to do a framework, then you can face a severe loss in your business. Framework includes-

  • How to execute?
  • How to track?
  • How to make a scoreboard?
  • How to check results?
  • How to review accountability?

If you have to make a business plan, you also have to execute it at the last level. Companies don’t face loss due to strategy; it may fail because of the plan’s execution.

23. Wrong target and positioning

When don’t you understand your position or target, or what your product positions are, such as its value for money product? Premium product? Chinese goods product? Or are you from the opportunistic market? Then you may face loss. Xiaomi has its position, Apple has its place, and Maruti has its stand, Mercedes has its location, and these companies do their business according to their positions.

24. Premature scaling

If you start the advertisement, expansion, business growth at the wrong time, you should understand the right time for scaling. The first thing is pilot, experimentation, and validation, then comes scalability and expansion. Pilot, experimentation, and validation means the customer will tell you whether you’re doing right or wrong and gives you advance, which means your business model is great, and you’re going right.

25. Ignoring user feedback

If you never check the review, or if you don’t have any model or any methods in which customer will leave their compliments. First of all, create a platform that should be private, not public. He may give the compliments or review through E-mail, feedback form, phone calls, meetings. When you get the study, try to improve as soon as possible.

26. Lack of profit or cash

Profit and cash are different issues. Profit means when you buy a product in 100 rupees and sell it in 150 rupees, that means you get 50 rupees profit, and cash means you purchase a product in 100 rupees and sell the same product in 150 rupees, but you don’t get the payment or credit. If your experience delayed payment, then you will face the loss in your business.

27. Wrong time to market

When you launch at the wrong time, it is definitely may cause you to lose in the business. If you are starting any product in Bhagalpur, Kanpur, Jaipur, Mirzapur, or Kharagpur, customers don’t need this product at that moment. This product is only demandable in Delhi, Mumbai, or Bengaluru, and you’re forcefully taking the products in the TR3 or TR4 level. Due to the wrong timing, you may receive customers lately, and after losing your working capital, you may burn out your cash.

28. Inadequate inventory management

If you’re blocking your cash by overflowing the inventory unnecessarily, you are making a big mistake. Your inventory will bring money to you. You have to manage your inventory smoothly that will help you to bring your money quickly.

29. No passion

If you choose a business where profit is more, but there is a lack of passion, you will face loss. If you have a passion for that business, you will get courage and energy. Don’t get involved only seeing the business model.

30. Scaling without technology

Are you thinking about the growth of your business without building the technology, then it will lead you to a significant loss in your industry. According to Dr. Mohan Das Pai, “You should expand your business through technology.”  You don’t have to hire more workforce, don’t have to open office frequently, don’t have to set up factories regularly, don’t have to create infrastructure, don’t have to bring machines often. You should keep focusing only on technology. That will help you to expand your business at a low cost.

31. Personal use of business fund

If you take a loan from the business, then never use it for your expenses. Fix a monthly salary for yourself also because it is not only your money. Every employee from your company deserves the money. So, if you’re thinking of buying a car, house, or go on a vacation in this money, it will be the biggest mistake for you.

32. No succession planning

You have to choose your future leadership; you have to create your next team. You have to determine who will come after you for guidance, also select someone who can manage the business without you. You have to choose a successor by technology, team, and training who will handle your business correctly in your absence.

33. Failure to identify the opportunity gap

You can become a failure if you can’t identify the opportunity gap. You have to understand future delaying thinking. You should follow the problems which may occur in the future and can easily differentiate the big opportunity gap. Create something that will instantly capture the market, and you can take the premium charges by adopting the problems.

34. Bad product experience

If the customer faces any bad experiences, then they will not return to buy your product anymore. The golden statement is, “Sales marketing can bring the customer, but Product quality will make customers stick to your product.”

35. Untrained or disharmonious team members

You may create a team, but they can’t easily cope up with your changing organizations. Either you can’t train them correctly, or you are not able to manage their harmonies. Due to politics, your business execution may become slow. If there is disharmony between employes, your business growth speed will decrease. It is a big issue for your business because your team will help you in expanding your business.

36. LTVC ( Long term value of customer )

If you can’t produce repeated customers, if you can’t build a recurring revenue business, If you can’t manage the passive income, which will bring you money in the future, then you will face loss in your industry.

Final Verdict

These 36 reasons can make you a failure. Please note down these Thirty-six points and rate your company or organizations by these thirty-six points. Check properly between these points, where you are qualified, and where you are not qualified. Discuss with your team members whether you are going right or wrong and share with your investors and customers.