There are dozens of reasons or causes espoused as to why a business is struggling, or not meeting original expectations.
Let’s take a look at some of the common ones:
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Cash flow
Often seen as a legitimate reason because statistics like ‘seven out of 10 businesses fail in the first year because of cash flow’ are bandied around.
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The environment
‘The retail market is in the doldrums’, ‘Mining is in the production phase and no longer in the development phase’. There’s no perfect environment in which to conduct business, so stop complaining.
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Global recession
This is a tricky one, but how many global recessions come along in an organisation’s lifetime? And, really, I’ve never seen a global recession that wipes out 100% of
businesses in all sectors. Many businesses manage to struggle through a recession – global or local. -
The appreciation of the currency
Another good one, often closely followed by the depreciation of the currency.
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My main customer’s business failed
If you have a smart strategy in place, you will have other customers who will fill the gap, maybe not immediately but in time.
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Lack of sales
Well, yes, this will cause business failure, so look at your product, prices, sales team and marketing. The reason is not lack of sales, is it? The problem is one or more of the above.
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The cost of product went up
So, that’s it? Straight into liquidation? Couldn’t you put up your prices, seek a new supplier?
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Banks have pulled their lending
Again, this is not really the reason. The reason is that you borrowed too much money and couldn’t pay it back.
The reasons your business is not running so well or could run better, which I regard as excuses, can be put into two broad groups – environmental and business. I don’t believe any of them are the cause or reason of business failure, instead they are symptoms.
The symptoms of a struggling business
When you wake up in the morning and it is raining, or the sky is blue, what can you do to change that situation? Obviously, the answer is nothing at all. You have absolutely no control over whether it is going to rain, or over the colour of the sky. The weather is what it is, and you have to just learn to live with that. Likewise, environmental reasons occur in business.
If there is a global recession, or the currency is appreciating, or there is a flood or a drought – there is very little you can do about it and you need to learn to live within that environment.
Ships don’t sink because of water around them. Ships sink because of water that gets in them.
Don’t let what’s happening around you get inside you and weigh you down. It’s surprising that anybody would even start a business when they hear all the doom and gloom stories about businesses going bust because of lack of cash flow, or the landlord hiked the rent, or their main customer went belly up, or the supplier put up the price. Again, these are business symptoms – they are not reasons for failure.
Three valid reasons why businesses struggle
There are, in my opinion, three valid reasons for an ailing business.
Your business is not running so well, or could run better, due to one or more of the following:
- A lack of business skills
- A lack of attention to applying business skills
- Spending most of the time working in the business rather than on the business.
Surely not, I hear you cry. Don’t misunderstand what I am saying though. And don’t just take my word for it. Michael E Gerber, author of the bestseller E-Myth Revisited, nailed it when he said:
“The assumption is that they understand the business because they understand – and maybe are experts at – the technical work of the business. They think they know the work, they are qualified to run the business.”
What he means is you may be a technical expert, but you also need to know how to run a business. The good news is that running a business is a skill – and skills can be learned. All you need is some devotion and time (and perhaps read my book Run Your Business Better too).
