Why Businesses Fail

The number one reason why businesses fail is obviously sales.

Most failed businesses contribute their failure to a lacking in or inconsistency of sales. No matter which industry, if they are big or small businesses, the one thing they all have in common is that they all depend on a steady influx of money or revenues. This is achieved with your front end sales as this is the main artery of any business.

“Putting the horse in front of the carriage” as I like to say, means make sure you are turning a profit before you spend company revenues or investment money. That tells me that every corporate dollar spent MUST see a good return on investment or it will surely lead to a failed business.

This means you must invest generously on marketing and lead generation programs to keep your sales teams supplied with fresh prospects, enabling them to create profits. An inadequacy in the marketing department is why businesses fail.

David Packard of Hewlett-Packard said, “Marketing is too important to be left to the marketing department” Failure could have been easily avoided by increasing sales, leads, prospects and expanding the consumer base.

According to Gartner, most successful companies spend around 14% of their entire marketing budget on acquiring the marketing list alone.

Failed businesses most likely didn’t put enough emphasis on their lead generation programs or marketing list.

While its true this is why businesses fail, how does the impact differ between old and new businesses. New businesses fail mostly because a lack of planning. “He who fails to plan plans to fail” this being said you must dedicate the right amount of funds necessary to market your business competitively. Whether this means driving traffic to your website with SEO or lead generation programs like telemarketer leads you must conduct thorough research to make sure you have high probability to cash flow and generate profit.

Believe it or not, most old business failed for exactly the same reason. Not enough money spent on marketing. Where an older company might have planned for their first year, maybe they didn’t plan for the future or unforeseen things could have occurred.

Time changes and so does supply and demand in the market place. If competition stiffens or demand decreases you may find yourself being forced to spend an increasing amount of funds toward your marketing budget. Not responding to industry trends can be another reason why businesses fail.


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