Commercial organisations need efficient process, the focus of leadership and structure that can adapt 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 continuosly observe three key reasons why this tragedy happens so often and to so many individuals with different experience, education and skill.
The first reason is lack of market comprehension.
Refusal to look at the water ahead. For example People dream up the concept, build the product and then expect the market to appear and purchase. In this connected age there is no excuse for lack of investigation prior to wasting any time and money on creating a product until you have robust evidence there is a market.
The second reason is lack of understanding of the basics of business.
A significant proportion of people starting a business know their trade, how to deliver a service or build a product, but not how to run a business. Having the ability to read and follow the balances in the P&L or the balance sheet is an essential skill. The basic knowledge of accounting is rarely imparted coherently by the business publications, internet resources and experts with the knowledge such as CPAs and bookkeepers. This subject 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.
Until recently ERP software solutions and packages were the privilege of corporations who had deduced that the back and front office systems need to be joined together to give a complete picture of the business. One technology business NetSuite had the foresight to see the gap in the market and began selling its small business ERP software. NetSuite pricing has become prohibitive as their product has increased in complexity.
The final reason companies don’t survive is because of a dirth of process and procedures that put in place the essential disciplines and continuity a business must have to perform effectively.
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