Business fails due to several reasons. Many of you might have some experience, somewhere in your life, in going through the mill when faced with a business failure. Let me re-visit and re-hap seven reasons of business failure:
1. Not doing the maths right
Business is all about numbers; you buy or manufacture a good in monetary terms; you hold it in inventory in the interregnum which costs you monetary figures; then you sell the goods for cash or credit; if it is cash money flows in straight away; if it is credit the period of such credit costs you bank interest which you have to pay. Everywhere you turn you see numbers. Beginning from the planning stage to the final implementation of your business plan you are slapped with numbers. Errors could creep somewhere in the value line. Perhaps you got it wrong at the time of purchase or bungled with a customer who turned out to be a bad debtor. In summary if you do not concentrate on facts and figures your business is vulnerable to failure.
2. The Big Picture is lost
Business is worried about survival in the short term entailing in constant fire fighting in the marketing and production departments. Marketer wants to cut price in a short term deal with a new buyer; production department grumbles because lowering price means either lowering quality or reduction of manufacturing profit. Then the existing buyers come to know and they too demand price revision. In the long terms there is chaos and the business starts to flounder.
3. No reverse engineering in the Value Chain
If you see your income statements, prominent and first figure is Sales or Turnover. Fantastic. But when you start the internal value chain you start with the production. You manufacture or stock the goods first and then find out how to sell these. In this case the value chain goes from production to marketing. When the value chain begins from marketing and then comes to production it is known as reverse engineering. While doing your annual budget you must first ask the questions what the market demand is and how it will work out for you. From this point you must run on reverse gear and find out how you should make your production satisfies this particular market scenario.
4. Not focusing on Core Business
In every business there is an area known as core business. A tobacco company has core business in the form of cultivating, processing and making cigars or cigarettes or tobacco for pipes. When such a company sees there is opportunity for inter-cropping tobacco with other vegetation well and good, it must go ahead. What happens is after sometime the other vegetation demands more time, resources and management attention. It is a classic Pareto rule. Twenty per cent of the production takes eighty per cent of the management time. Finally the core tobacco cultivation suffers resulting in a business failure.
5. Relationship is in shambles
Most cases business fails because it did not handle the human relation within the business properly or customer relationship outside the business properly or both. Today there is immense value placed on the relationship angle. A good relationship model should cover the stakeholder concept. Business stakeholders include: owners/directors, staff, customers, creditors, government, and society at large. Owners/directors should conform to standards and ethics and give proper directions to staff and make human resource pool happy and contended. Satisfied staff performs duties well, resulting in: Retention of customer loyalty; Retention of human resource pool; Improvement in profitability & growth of companies; Contribution of taxes and revenue to government; Involvement of the society at large. When this does not happen the relationship is in shambles and a business fails.
6. Cash-flow is the king, but he is dethroned
There is no doubt cash-flow is the one that keeps everybody going: owners, staff, creditors and debtors, government and society. Constant monitoring and progress chasing keeps the cash-flow intact. It is like oiling a machine to be in good state of repair. If you do not oil the machine breaks down one day. Cash-flow must be a continuous entity. Productions can take a short-break in between shifts; sales can take a holiday. No interruption in Cash-flow, never. Business fails because it dethrones the cash-flow and allows it to trickle and dries out finally.
7. Cosmics are not helping
All the above reasons are mundane; there is something beyond the realm of this sphere. Even after doing everything right still a business fails; no mundane reasons can be ascribed. This is where cosmics enter the picture. Cosmics are aspects residing in every person and as an extension in every business. Some businesses are eternal, for example, Columbia Pictures even though it has changed hands. There is something in that; may be it is the picture of a woman in white and flowing dress holding torch in the right hand; or maybe the pyramidal six step platform on which she stands. Cosmics can arise in different ways. You have to understand cosmics and turn it to your advantages. If this does not happen then cosmics are not helping you. Then the business fails no matter what remedial steps you take to arrest the failure.
Muthu Ashraff
Cosmic Adviser
Mobile : +94 777 265677
E-mail : cosmicgems@gmail.com