Business failure

• Business failure is when a business ceases to trade.
• Internal causes of business failure

  • Poor efficiency
  • Poor marketing
  • Failure to innovate
  • Poor management of working capital
• Poor efficiency

  • Causes can be because of aggressive and disastrous expansion plan. Reason for failure : Unrealistic sales forecast which lead to over expansion.
• Poor marketing

  • Misleading advertising
• Poor management of working capital

  • This is critical if a business is to survive.
  • Working capital performance is a measure of efficiency that compares a businesses' assets to its liabilities.
  • The inability to manage cash flow ; business fail because they haven't had enough cash to pay their bills on demand.
• External causes of business failure

  • Economic recession
  • Strong pound
• Economic recession

  • Customers start to save rather than buy - put off decision to purchase large expensive items and switch to buying more inferior goods
• Strong pound

  • Manufacturing businesses who heavily export will be effected. It mean their goods that they manufacture will cost their customer more.
  • Some businesses shift production overseas to counter this effect but not all can afford to do this.