by Eric Bailey

Created on: April 25, 2010

A free-market capitalistic economy depends on the entrepreneurial spirit of people who hopefully know why some businesses succeed and some business fail. Despite the best efforts of the brightest minds, most start-up small companies fail within the first year, and many in rather dramatic fashion.

At the core of these failings are a set of common characteristics possessed by entities doomed to failure. Not every enterprise will have all of these flaws, and not every idea will have them to the same extent as the others, but these are some of the biggest reasons why businesses fail.

Too Generic

The advancements, both social and technological, of worldwide human culture are due to the new, revolutionary, paradigm-shifting, innovative ideas of the human beings within the culture. The business culture is no exception: In order for businesses to exceed or make a name for themselves, they must present a concept that is original, and fits a previously unfulfilled niche. It may sound like common sense to realize that opening a new restaurant without the strength of an existing customer base or extensive marketing budget on the same strip with nine other restaurants within a square mile may be a terrible idea, but sometimes the zeal and fervor of an excited shop-starter can outweigh the obvious factors that do not forebode well.

Unprofessional

For some types of businesses to be successful, there must be a competent, diverse mix of talent and traits within its set of workers involved. But for some businesses, whether in start-up mode or slowly declining, certain necessary traits are lacking or completely nonexistent. For instance, if accounting records are not kept up-to-date and accurate, or customer service phone calls are handled by a surly mechanic with no concept of verbal communication skills, or inventory management is being managed by the creative-minded individual who had the product concept but has no organizational skills, the business is probably less likely to succeed than if it had the right skill sets placed in the appropriate places as needed. A lack of “business sense” will kill any operation in town, no matter how awesome the idea is.

No Passion

Many entrepreneurs fail to realize that, in order to get a start-up off the ground, the effort involved will often require working many unpaid hours of overtime and not seeing immediate returns on investment for months and months into operation. If a new business owner is not absolutely convinced of the necessity, validity, efficacy, and viability of his or her new business, then the necessary motivation to work through the long hours and gloomy atmosphere may be missing. It requires quite a person to maintain a positive attitude with continual energy, yet just such a person is required in order to avoid some of the pitfalls behind why businesses fail.

On a more specific, small-perspective, microscopic view, there are countless thousands upon thousands of reasons why businesses fail. For some, it may be a massive scandal that rocks their accounts and eliminates trust in their consumer base. For others, it may be a tragic accident on their factory floor. No matter what the circumstances, though, it is undeniable that there are many common factors behind why businesses fail, and it is best to avoid them if a new venture hopes to succeed in the highly competitive marketplace.

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