Why do businesses fail…?

2. Lack of experience

In a recent survey it transpired that 30% of businesses fail due to the lack of experience of management.

What areas can be considered and understood by our entrepreneur who is reading this, as the lack of experience are;

• Poor credit procedures, allowing too much leeway for late payment. Not collecting the cash is fatal.
• Expansion that is too rapid. This is commonly called ‘over-trading’ by bankers and supporters of the business and yet labelled ‘success’ by our entrepreneurs. The expansion requires cash resource to finance stock or human resources. Delaying the supply chain can lead to customer dissatisfaction very quickly.
• Inadequate borrowing processes. Not understanding the need to finance short term needs with working capital, medium term needs with finance and long term needs such as working fixed assets with exactly that, long term finance arrangements such as leases and hire purchase.

A lack of experience in the actual market place is fatal and would be the first question if any banker of financier was approached to support the business. Each industry carries its own wrinkles, querks and oddities.

Practice and experience is required.

Then, it is not surprising inexperience leads to failure.