40 Causes of Small Business Failure
In the article, The Rise and Fall of Small Business Enterprises, it discusses forty reasons for small business failure. Listed below are the causes of most small business failure, which some are due to poor management:
) Profit erosion
2) Undercapitalization
3) Lack of cash cushion
4) Lack of marketing focus
5) Outdated and low-quality product
6) Poor customer relations
7) Bad pricing strategy
8) Premature/uncontrolled growth
9) Ineffective leadership
10) Inability to control expenses
11) High overhead cost
12) Overlooking details
13) Wrong reaction to new external and/or internal challenges
14) Fraud and legal disputes
15) Failure to plan
16) Getting outsmarted by competitors
17) Overdependence on one or few customers
18) Leadership conflict/rivalry/power struggle
19) Low product acceptance
20) Failure to deliver value
21) Poor inventory management
22) Lack of product differentiation
23) Macro-economic challenges left unanswered
24) Excessive government regulations
25) Failure to learn from mistakes
26) Rigid and unproductive organization culture
27) Loss of experienced staff/managers
28) Excessive reliance on borrowed capital (high leverage)
29) Lack of vision
30) Failure to seek outside help for problem solving
31) Poor internal communication
32) Excessive concentration of authority
33) Overlapping responsibilities
34) Bad location
35) Technologically freezing in place for a long time and failure to take advantage of new technological advances
36) Sticking to ineffective competitive formula/strategy
37) Under-estimating or over-estimating risks in the marketplace
38) Failure to recognize and take advantage of new market opportunities
39) Negative cash flow
40) Loss of key suppliers
(Alsaaty & Makhlouf, 2020)
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Reference
Alsaaty, F. M., & Makhlouf, H. H. (2020). The rise and fall of small business enterprises. Open Journal of Business and Management, 8(4), 1908-1916. https://www.scirp.org/journal/paperinformation?paperid=101924
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