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Why do businesses fail? by Caitlin Jones-Bennett

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Inveralmond chs

on 13 September 2012

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Transcript of Why do businesses fail? by Caitlin Jones-Bennett

Why Do Businesses Fail? Businesses Fail for a number of reasons....
*Cash Flow Problems
*Competition Is Too Fierce
*Business Generally Is Bad
*The Business Had Not Kept Up To Date
*Poor Management
*Shortage Of Finance
*Staff Problems
*Faulty Equipment
*Political Challenges Cash FLow Problems:
*cash flow causes most problems
*many businesses do not plan ahead properly - they do not draw up a cash budget
*they have been too optimistic with their figures
*perhaps a big customer takes a long time to pay or even goes bust owing them money
*or there is something quite unforeseen like a petrol blockade or foot-an-mouth which stops people moving about and affects trade.
*the results is that there is not enough cash coming in to pay the bills.
*the bank may allow an overdraft for a limited time but if things don't improve the business will fail Competition is too fierce:

*they have a better product
*they use destroyer pricing - making prices so low other businesses can't compete.
*companies have joined together (illegally) to push you out. Business generally is bad:-

the economy is in recession which mean that:-
*less is produced
*less is earned
*less is spent
*less is bought
*more people are unemployed and have no money to buy things. Business has not kept up to date:

*the product is obsolete
*the product is no longer fashionable
*method of production is old-fashioned and inefficient
*marketing is not effective Poor Management:

*stock not available - customers go elsewhere Shortage of finance:

if there is a lack of money in the business, the business may find it more difficult to:
*buy new equipment
*pay bills Staff Problems:

problems with staff can occur if they feel they are not working in a good enviroment including the following:
*poor industrial relations resulting in employees going on strike etc
*poor quality of goods/services due to unmotivated staff
*staff may leave for an organisation offering better wages, promotion prospects. this may result in a fall in production Faulty Equipment:

Problems with equipment may result in products:
*which are of poor quality
*not produced on time
*not up to the standard of competitor's products
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