How Businesses Shoot Themselves In The Foot

Businesses fail because of people, period.

The effects of the failure can be observed, for example, on organization, processes, product or service, finances, marketing and sales.

The causes can be related to strategic planning, implementation, management, control, human resources, absence of competitive intelligence and external factors like market dynamics or government regulations.

If we are talking about new ventures or small enterprises with less than two years, the most common reason for failure is related with financial problems. The most common cause of the financial problems is related with managerial faults and a weak strategic planning.

Managerial faults can be rooted in poor organizational control, follow-up, course corrections, the wrong people in the wrong place, underestimation of the target market, unrealistic cost estimation and so on.

A weak strategic planning, or inside the drawer, is one of the key factors contributing to business failure. A strategic plan is a dynamic document. As the enterprise evolves, so does the market. The defined strategy must be updated and in the course of time, corrections must be made to keep the boat on the right course with the right velocity.

Talking in a global context, each cause has its origins in the business environment, the global region and the profile of the entrepreneur.

But all problems usually start with managerial faults and bad planning.

Also, small entrepreneurs usually have a small cash flow, which makes o a “second chance” almost impossible. If a large enterprise makes a wrong investment and fails, it is only a bad investment and shareholders (or the government) will pay the bill. Small entrepreneurs do not have that chance.

Now, if we are talking about well established enterprises and large companies, usually the problem starts with managerial incompetence and expands to financial problems.

Well established enterprises need to have a continuous process of reinventing themselves. They should follow the procedures of learning organizations – always learning and upgrading. They must be in line with market trends, new products, new demands and they must control costs, prices and margins. They must also have an effective process called competitive intelligence.

We are in the ‘Knowledge Era’ and in a globalized world, so the horizon of business changed radically in the last two decades. Companies that do not follow this trend, complacent in the old market share already achieved, will be vanquished by new entrants, new products and new ways of doing business.

Similar thought should be used by new entrepreneurs. They should explore the new technologies, the internet, social networks, blogs, chats, and so on. New entrepreneurs need to create competitive advantages with these new technologies to enter and enlarge their market and exposition. There are plenty of tools at a low cost or even free of charge, already available on the web.

In summing up, be sure to develop a consistent strategic plan, take care of day-to-day operations with continuous follow-up and control. Take time to carefully chose the right people for the right positions. Work closely with your collaborators; hear and understand their feelings, needs and aims. Watch the competitors. Keep close to your clients and be sensitive to their feedbacks and needs. Remember – fortune favours the bold.