Businesses can fail for a range of reasons, many of which are obvious. There are, however, a number of (perhaps less discernible) factors that frequently and unwittingly contribute to the failure of businesses. We’ve listed some of these below – don’t say we didn’t warn you!
1. Putting all of your eggs in one basket
Being able to build and foster relationships with customers and clients is obviously a powerful and vital tool. Naturally, businesses tend to adapt and develop as their relationships with certain clients and customers also develop. It is crucial however, that the vivacity of a business does not become dependent on any one of those relationships. The future cannot be predicted and for many reasons, a customer may not always be yours. A business should always be in a position to withstand the loss of a major client.
2. Relying on certain employee(s)
A business should similarly be in a position to survive the loss of a key staff member. The departure of a long-term, reliable and pivotal member of a team can be somewhat of a shock to the system. While the transition to ‘life’ after that person’s departure may not necessarily be seamless, a strong business will capably weather the storm. Ensure all staff members are indeed ‘replaceable’ at a practical level.
3. Inadequate (or non-existent) record keeping
Business performance cannot be accurately ascertained without appropriate record keeping. Systems, procedures, protocols, software and regular training are vital to effective record keeping. If you are not sure what data should be recorded, obtain the necessary advice. Equally as important as the correct recording of information, is that it be regularly monitored and properly understood. Take the time to be fully informed of the financial position of the business.
4. Lack of Planning / Direction
“What’s the use of running if you are not on the right road?” – German proverb
How can a decision be confidently in the best interests of a business if those interests are yet to be identified? It is essential that a business have a strategy for its future growth and direction. In our experience, the most efficient businesses are those with well-defined, regularly reviewed goals.
The demise of a business is often as a result of a variety of issues, and not a single, isolated trigger. In our experience however, at least one of the above issues is usually a significant contributing factor. If you feel your business may be at risk, particularly in light of the above, you should take proactive steps to safeguard it accordingly. Sajen’s experienced strategic commercial, employment and insolvency teams are available to assist.
For more on insolvency, check out this blog post: 5 Symptoms of Post-Christmas Insolvency