Commercial organisations need effective process, the focus of leadership and structure that can stretch to enable the business to grow safely as a massive 55% of businesses fail in their first five years of existence. The experts offer banal opinions as to why this occurs. I consistently see three key reasons why this tragedy occurs so often and to so many people with different experience, qualifications and skill.
The first reason is insufficient market understanding.
No foresight. For example People dream up the concept, build the product and then sit back and wait for the market to come and purchase. In information age there is no excuse for lack of research prior to spending any time and money on creating a product until you have solid confirmed there is a market.
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The second reason is lack of comprehension of the basics of business.
A significant proportion of folks starting a business know their trade, how to offer a service or manufacture a product, but not how to run a business. Having the ability to understand and follow the numbers in the profit and loss or the balance sheet is an essential skill. The basic knowledge of accounting is rarely imparted coherently by the business publications, online resources and those with the knowledge such as CPAs and bookkeepers. This problem is further complicated by technology vendors and their affiliates pushing small business accounting software at fledgling businesses.
Small business accounting software is only half of the solution.
Large enterprises way back worked out that all of their Information systems should be fused together to give them a total picture of the business and then along came ERP software solutions and packages. One vendor NetSuite had the vision to see the opening in the market and started selling its small business ERP software. NetSuite pricing has since increased and put their technology out of the financial reach of small businesses.
The third reason businesses fail is because of lack of process and procedures that put in place the essential disciplines and consistency a business must have to work effectively.
