Chapter 15 Reasons for Business Failure

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Draggable item		Corresponding Item
Overtrading		When a business is unable to continue to run its operations
External factors		When a business is unable mange the amount of cash coming into and out of the business on a regular basis
Poor cost control		When a business has insufficient funds (working capital) to run the business e.g. wages, stock, bills
Poor leadership		Business is unable to compete in the market
Lack of business skills		A business does not keep up with changes currently happening in the market e.g. technology, Nokia, Kodak, Blockbuster
Cash flow problems		Developing new products or using new technology, designs
New entrants		New businesses entering into the market, competitors
Unexpected expenditure		Not managing costs within the business e.g. wages, stock & utilities gas, fuel, electricity
Ineffective marketing		Poor marketing mix for products, e.g. poor design, overpriced products, unsuitable channels used for marketing e.g. TV instead of social media
Failure to adapt to changes in the market		Owner does not have the skills and experience to carry out the different functions HR, marketing finance
Financial management		When the leader makes mistakes, poor decision making
Business failure		Taking on more work than a business can afford to handle afford
Over borrowing		Making poor investment decisions e.g. timing when business first trading not purchasing expensive capital items e.g. machinery, vehicles
Lack of finance		Borrowing large amounts of loans from the bank
Not competitive		Careful management of cash and finances during periods of less sales
Seasonal factors		Such equipment or machinery breaking down
Innovation		Consumer tastes, legislation PEST
Investing too much in fixed assets		Poor handling of money coming into out of business not understanding importance of cashflow