Commercial organisations need effective process, the focus of leadership and structure that can adapt to enable the business to grow safely as a massive 55% of businesses don’t make it to their fifth birthday. The commentators 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 backgrounds, education and knowledge.
The primary reason is insufficient market understanding.
No foresight. For example People have the concept, create the product and then expect the market to flock and purchase. In information age there is no excuse for lack of research prior to spending any time and money on designing a product until you have firm confirmed there is a market.
The number two reason is lack of understanding of fundamental facts about business.
A significant proportion of folks starting a business know their trade, how to offer a service or build a product, but know very little about running a company. Having the ability to read and track the numbers in the profit and loss or the balance sheet is an essential skill. The basic knowledge of accounting is rarely imparted well by the business publications, internet resources and those in the know such as CPAs and bookkeepers. This whole area is further exacerbated by technology vendors and their partners pushing small business accounting software at fledgling businesses.
Small business accounting software is only half of the solution.
Until recently ERP software solutions and packages were the privilege of larger enterprises who had deduced that the back and front office systems need to be joined together to give a comprehensive view of the business. One vendor NetSuite had the vision to see the gap in the market and began selling its small business ERP software. NetSuite pricing has since increased and put their solution out of the financial reach of small businesses.
The final reason companies fail is because of lack of process and procedures that put in place the vital behaviours and continuity a business must have to work efficiently.
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