Business failure

• Businesses can fail due to poor management, lack of finance or resources, competition from other businesses, changes in the market, economic conditions, natural disasters, legal issues, and technological advancements.
• Internal reasons for business failure is where the business fails due to the business itself rather than external reasons in which business failure occurs however not due to the business and due to external factors
• Poor market research (Internal) - When entering a new market, a business should conduct some market research whether that be primary or secondary to gain information and intelligence regarding market conditions, competitors or consumers
• Failure to innovate (Internal) - Failure to innovate means competitors may catch up to speed regarding trends or changes in technology which influences certain products and their usability; this means a business could lose market share or fall behind in trends regarding consumer preference
• Poor cash flow management (Internal) - A poor cash flow may result in a business being unable to pay their current liabilities due to a lack of cash; a cash flow forecast would help improve cash flow as it would've identified periods of cash shortages which the business could have prepared for
• Lack of planning (Internal) - At the start up stage, entrepreneurs can be prone to overlook how important it is to plan; through the use of a business plan a business can achieve a clear vision for the future of the business as well as setting targets and objectives which provide a virtual roadmap for the businesses future direction - planning also allows for a business to identify potential problems in advance so the business is better prepared to deal with them
• Strong pound (External) - A strong pound will result in an increase in the price of domestic exports which will reduce the competitiveness of domestic goods being sold abroad; As a result, exporting businesses will see a decrease in demand for their good/service = reduction in revenue; a business may try to counter balance this by shifting production overseas but most can't afford to do so
• Intense competition (External) - High competition can lead to reduced market share and consequently low amounts of revenue unless a business is well established within a market or they have a wide consumer base that they can rely on due to the diverse use of their products/ service e.g. Nike - shoes, tops, socks, football tops, jumpers
• Government policies (External) - Policies set by the government such as a big increase in corporation tax could increase a businesses cost of production massively; tax increases could make products more expensive for consumers = decreased demand = loss of sales & revenue
• Recession (External) - A change in the economic conditions such as a long term fall in economic growth may result in a significant reduction in demand meaning products/services which aren't essential could see a vast decrease in demand = loss of revenue