External factors: such as consumer tastes, changes in
legislation or a downturn - period or process in which
Cash flow problems:
Failure to innovate: innovations fail for some of the
following reasons: fear of taking risks, high costs,
lack of market orientation, failure to scale, poor
organizational structure or processes, wrong
Reasons for busines failure
decisions, lack of internal communication, and low
priority for innovation.
New entrants: competitors may bring in superior products,
read market conditons more effectively, charge lower prices
because their costs are lower, or use 'destroying pricing'
(very high discounting), if they a powerful company, to drive
smalled rivals out of the market.
Not competitive:
Ineffective markting: such as a business launching a new
product -: fails to tak off, use inappropriate pricing strategies -
> prices are too high/ low, might invest too heavily in
overpriced or inapropriate marketing campaigns, or might use
an inappropriate marketing strategy.
business activity, production, etc is reduced and conditions
become worse in the economy.
Unexpected expenditure (action of spending funds): such
as tax demands, breakdtowns, strikes and bad debts ->
might be caused by lack of experience or poor planning.
Seasonal factors: trade varies for seasonal reasons.
Allowing too much credit: some businesses allow their
customers too long for payment -> they are waiting for money
and may actually be forced to borrow during this period.
Overtrading:when a business is attempting to fund a large
volume of production with in sufficient cash, even if it is
profitable.
Investing too much in fixed assets: - *resources that are
used repeatedly for a long period of time by a business such
as property, tools, vehicles, and machinery.
Over-borrowing: borrow to finance growth -> as more loans
are taken out -> interest costs rise.
to avoid overborrowing a business may try to raise more
capital from it the owners - perhaps by selling shares.
Poor financial management: inexperience in managing
cash or a poor understanding of the cash flows into and out
of a business may lead to cash flow problems.
Lack of finance: a situation where one market
segment (customers, small businesses, traders, etc)
lack adequate access to capital at reasonable rates
in order to either finance their core business
activities, which means they are undercapitalised -
starting a business with insufficient capital
Lack of business skills: some businesses lack
competitiveness and fail beacause their owners are not
sufficiently skilled.
Poor leadership: a business might lose its competitive edge
in the market because the leader makes a mistake, which
could be the result of poor decision making or a failure to
make urgent changes.
Ineffective cost control: businesses cannot keep their costs
down, therefore if the costs are too high, they may lose trade
to low-cost competitors.