Companies need efficient process, the focus of leadership and structure that can stretch to enable the company to grow safely as a massive 55% of businesses don’t survive the first five years. The commentators offer useless ‘insight’ as to why this happens. I continuosly observe three key reasons why this tragedy occurs so often and to so many people with different experience, education and knowledge.
The primary reason is insufficient market understanding.
Refusal to look at the water ahead. For example People dream up the idea, build the product and then sit back and wait for the market to flock and buy. In networked age there is no excuse for lack of research prior to spending any time and cash on creating a product until you have firm evidence there is a market.
The number two reason is lack of understanding of the basics of business.
The majority of folks starting a business know their trade, how to offer a service or manufacture a product, but not how to run a business. Being able to understand and track the numbers in the Income statement or the balance sheet is an essential skill. The basic knowledge of accounting is rarely imparted coherently by the business manuals, online resources and those with the knowledge such as CPAs and bookkeepers. IT Giants such as Sage software and Intuit aggressively fool business managers with their marketing that their packages are the holy grail.
Sage software and other vendors as usual are underserving small businesses.
Large enterprises way back worked out that all of their Information systems should be joined together to give them a total view of the business and then along came ERP software solutions and packages. One software developer NetSuite had the vision to see the opening in the market and started offering its small business ERP software. NetSuite pricing has become prohibitive as their product has increased in complexity.
The final reason businesses fail is because of lack of process and procedures that put in place the essential behaviours and consistency a business must have to perform efficiently.