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Tuesday, July 02, 2013
Many researchers have been conclusive that reasons for small business scale business failures are in most cases attributed to the lack of control of the entrepreneur.
The business failure record published by the United State of America Small Business Administration in 1974 lists major reasons for the failure of new businesses as follows:-
Inadequate Market Knowledge: this includes lack of information about the demand potential for the product or service present and future size of the market, the market share that can realistically be expected and appropriate distribution methods.
- Faulty Product Performance: often new product do not perform properly because of hastily taken short-cuts in production development and product testing, or inadequate quality control.
- Ineffective Marketing and Sales Efforts: poor results often indicate adequate or misdirected promotional efforts and tack of appreciation of the problems involved in selling to, or servicing of, unfamiliar markets.
- Inadequate Awareness of Competitive Pressure: new ventures often fail because the entrepreneur did not take into account the possible reactions of competitors, such as severe price-cuts or special discount to retailers.
- Rapid Product Obsolesce: the economic life of a new product tends to get shorter; in many industries technological advances are as rapid as to make a new product obsolescent shortly after it is launch.
- Poor Timing for the Start of the New Product/Venture: choosing the wrong time to launch a new venture often leads to commercial failure. A new product or service may be introduced before a real market interest or technological need for it exists, or it may be placed on the market too late, when consumer’s interest is warning.
- Under-capitalization, unforeseen operating express excessive investment in fixed assets, and related financial difficulties. These financial problems are also among the major cause of new venture failure.