Why do so many businesses fail?

Written by admin on Wednesday, January 21st, 2009

Short article on the explanation on why businesses fail.

The business owner of a small-medium sized business or family business is usually alone. It is a difficult world out there.

50 % of business startups go bust within the first 2-3 years. Another 20 % goes bust in the next 3 years. Hence 70% of all new business startups fail.

The fundementals of starting up a business are multi-fold. The business model has to be sound, the strategy in place, and the firm has to adapt itself to the needs of the changing market place.

Most firms usually have difficulty in making the transition from the entrepreneurial stage to the maturity stage in their life cycle.

In a recent study conducted it was found that fewer than 30 % of successful family businesses make it to the third generation and less than 15 % of make it through that generation.

Problems in the family business can be seperated in to two categories, a. business problems , b. family problems. It is difficult to seperate family matters from business matters. Yet that is exactly what must be done to ensure longevity.

We have dealt with numerous small-medium sized businesses and family businesses, taking them from the startup stage to the maturity stage. We have also encountered numerous cases where such businesses were doomed to fail for various reasons.