WHY DO BUSINESSES FAIL?
The bigger they are, the harder they fall…
Unfortunately, another competitor of Pre-met has recently gone into administration. Sadly. this is not an isolated incident as several more continue to post challenging annual financial results, some firms much larger than Pre-met. It is never nice to see another business collapse because that means jobs are lost and families affected. In this blog, we uncover some of the reasons why businesses fail and identify the solutions that can prevent failure.
Keep putting your head in the sand and you'll never find any problems…
“Develop success from failures. Discouragement and failure are two of the surest stepping stones to success.”
Dale Carnegie, American Writer and Lecturer
(Sales, Corporate training, self-development, interpersonal skills)
Carnegie was a well-known writer and expert on business. He understood that success is derived from learning the lessons from failure. As a business, if you keep ignoring issues and burying your head in the sand, you may well avoid facing challenges until it is too late. At which point your business may be heading for administration and any solution to rescue the venture has long passed. Reflecting on Carnegie’s wise words gives us food for thought in these difficult times for the world economy.
The factors that are beyond the control of every business
Undoubtedly, some factors are way beyond the control of any business, especially the following ones:
- Global supply chain challenges
- Acts of God
- Runs on currency and commodities
- Cost of living crisis
Global supply chain challenges are currently affecting most businesses worldwide with rising prices for raw materials and energy price hikes being passed along the supply chain in pricing.
‘Acts of God’ such as natural disasters including fires, floods, earthquakes, and so on, cannot be controlled. However, companies can prepare for such eventualities with risk management strategies in place e.g. a colocation data centre can ensure there are flood and earthquake protection measures in place to ensure the continuity of services.
The instability of currency and commodities and the effect on corporations in times of economic uncertainty are also beyond the control of businesses. Lastly, the cost of living crisis with global inflation is not something that businesses can change. Instead, they have to be strategic in their planning; inflation increases the costs of the supply chain and there is a need to raise salaries. Being agile in their business strategy can mitigate such challenges.
The importance of looking ‘under the hood’ of your company
Looking under the hood ‘to diagnose business problems and receive proactive advice on how to improve’ is a must for every business. (Source: inspire.accounts, 2023)
Examine the internal workings of your own business to stay aware of challenges and pitfalls. This is a proactive approach that Pre-met takes regularly to make sure that we are primed and agile enough to react to change.
You need to ask yourself as a business owner this question, ‘Do you look under the hood retrospectively and, more importantly, as the owner/entrepreneur and your senior management teams, do you all look under your hoods to evaluate business problems and positively seek solutions?
Ever?
IF so, how often
IF so what do you look for?
WHEN you do, do you take prompt and decisive actions when there are options available to you and your team ?
The thing is, if you are not looking under the hood and evaluating your internal systems and processes, you are vulnerable to crisis when it arises.
Be proactive, look under your hood and ask questions!
Never assume the simple basics are in place
“Be brutally honest about the short term, and optimistic and confident about the long term.”
Reed Hastings, Businessman and co-CEO of Netflix
Honesty and confidence are two important characteristics in business. Being ‘brutally honest’ in the short term is vital to overcome some of the aforementioned challenges. Confidence in the long term comes from getting the basics right. However, never assume the simple basics are always in place. Make sure they are and persistently check to ensure they remain so.
Three years ago Pre-met followed, what we believe to be, "doing the basics well". Nevertheless, the basics had been neglected for some years, but we now revisit them regularly. These are the questions that we ask ourselves:
- What is our core product portfolio and business model?
- Which key processes need to be monitored, measured, and managed in the delivery of our business model?
- Do we have an organisation and cost structure that is optimised for our core processes and scale?
- Do we review, monitor, and manage the performance of our key processes?
- Is our overall business performance in sync with our Business Model, Scale, Processes, and the current Business Environment?
As winter approaches, I wish you the best of success in maintaining long-term, sustainable growth for your business in difficult times.
