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Why Does A Business Fail?

Why Does A Business Fail?
October 06
09:39 2014

An Australian and Securities Investment Commission (ASIC) report has revealed that poor cash flow, inadequate strategic planning and market trading changes were the biggest company killers over the last financial year.


The total of 223 Information Technology and Telecommunications (ICT) insolvencies or 2.5 per cent of the 9500 corporate failures becomes a sobering statistic highlighting the changes facing ICT and the wider business community.

Just six of these ICT insolvencies including NCSS , Remora, Tonnex, MobiLink, CPS, The Laptop Factory (Sydney) amount to almost AU$17 million (FJ$28 million) in combined debts, of which AU$12 million (FJ$20 million) debts are to unsecured creditors.

The supplier debt fallout will be felt for at least another year.

Reasons for failure

Looking across all the industries the report also highlights the top three reasons for business failure:

• 42.6% Cash flow management

• 42% Strategic planning

• 32.5% Trading losses

These numbers plainly show that market forces have shifted causing trading losses thereby creating a significant impact to cash flow.

Information Technology is an integral part of any business, and fundamental component of the strategic planning, showing that if a business is prepared to adapt, it can survive and thrive.

It is sad to see that many of ITC companies failed to have their own strategic plan, adapting to the changing marketplace.

Don’t be a statistic

Strategic planning failures account for 42 per cent of the total failures meaning small, medium and large business still do not see the market place changes, or worse ‘fail to plan, respond or adapt’.

This is a sad statistic given the business education videos, books and education material available on the internet.

Two business books that contain methods for strategic planning, business strategies, sharing new ideas plus case studies are available for you to buy on-line. The books suit both new entrepreneurs and experienced business owners.

If you are thinking of starting a business or already operating a business, the way to avoid becoming a local statistic begins with ‘educating yourself’.

Once educated you then can read the warning signs and come up with immediate plans, actions and solutions.

– Kelvin Davis is the director or Greymouse, a cloud 24/7 oursourcing provider, with offices in Fiji and the Philippines. Insider business news is now available at . Just visit the site and sign up for your free news subscription.



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