why do some business plan fails

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5 Reasons Strategy Execution Fails

• 21 Dec 2023

If your organization struggles to keep up in an increasingly competitive market, it’s not alone. Successfully executing transformative strategies is a challenge for many businesses.

The benefits of effective strategy execution are immense. According to a PwC survey , companies that invest more time and effort into strategy execution are three times more likely to report above-average growth and twice as likely to report above-average profits than those that don’t.

However, strategic plans don’t always succeed.

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Why Do Strategic Plans Fail?

Companies’ strategic plans often fail for the same reason: ineffective strategy execution. According to Harvard Business School Professor Robert Kaplan’s book, The Balanced Scorecard: Translating Strategy into Action , 90 percent of organizations fail to execute their strategies successfully.

“Studies have shown that execution is continually rated as one of the most significant challenges by executives,” says HBS Professor Robert Simons, who teaches the online course Strategy Execution .

For example, consider technology company IBM’s strategy execution mistakes . When personal computing became popular in the early 2000s, IBM managers continued to allocate resources to the business’s archaic aspects, like mainframes. As a result, IBM lost its industry standing once competitors began offering well-built, affordable PCs to consumers.

“There are many stories like this,” Simons says in Strategy Execution . “In each, we find a business strategy that was well formulated but poorly executed. And while you can find lots of advice on how to devise better strategies, there's very little guidance on how to execute those strategies.”

To help understand how to manage and implement strategy more effectively, here are five common reasons strategy execution fails.

1. Ineffective Resource Allocation

Resources are a powerful tool and provide the support to achieve strategic goals; businesses that fail to allocate them effectively rarely succeed.

For example, Circuit City was a successful electronics company that faced financial challenges caused by poor resource allocation. Instead of selling off risky business acquisitions , the company eliminated its most valuable resource: experienced sales staff. That decision proved detrimental when the company lost its competitive edge in providing quality customer service and industry knowledge.

One way to avoid similar outcomes is by designing high-performing jobs and understanding what roles require more resources and funding.

“Job design is a critical part of strategy execution,” Simons says in Strategy Execution . “If individuals don't have the resources they need and aren’t accountable in the right way, they won’t be able to work to their potential.”

To ensure your organization’s jobs align with its business strategy , Simons recommends using the Job Design Optimization Tool (JDOT) , which enables you to design or test any job by analyzing its balance of demands and resources.

The JDOT helps determine the following aspects of job design:

• Span of control: The resources for which you’re given decision rights and held accountable for performance.
• Span of accountability: The range of trade-offs affecting the performance measures used to evaluate employees—defined in both financial and non-financial terms.
• Span of influence: How many people you must reach out to when attempting to influence others’ work.
• Span of support: The support you can expect from those in other organizational units.

In terms of resource allocation, be mindful of who on your team needs wider spans of control. Those employees should directly support your business objectives and aid in strategy execution.

2. Ineffective Risk Management

One of the most common reasons strategy execution fails is ineffective risk management . While external factors like emerging disruptive technologies and evolving customer needs can negatively impact business strategy, many companies forget to mitigate internal risks.

Consider the downfall of energy company Enron. Due to a lack of internal monitoring, the company misled investors and stakeholders about its financial health for years through fraudulent accounting practices .

Effective oversight can help prevent such situations, but leaders are often expected to monitor too many aspects of their businesses simultaneously.

One of the best ways to prevent what Simons calls “bad employee behavior” is through internal controls —policies and procedures designed to ensure reliable accounting information and safeguard company assets.

“Managers use internal controls to limit the opportunities employees have to expose the business to risk,” Simons says in Strategy Execution .

There are three types of internal controls:

• Structural safeguards: Ensure a clear definition of authority for individuals who handle assets and record accounting transactions (for example, segregation of duties).
• Systems safeguards: Assure procedures for processing transactions and management reports are adequate and timely (for example, database security).
• Staff safeguards: Make sure accounting and transaction processing staff have the right levels of expertise, training, and resources (for example, job rotation).

Leveraging internal controls like these can help mitigate internal risks that could hurt your strategy execution.

“There's a lot of opportunities if we start thinking about internal controls and what it's trying to prevent,” HBS Professor Eugene Soltes says in Strategy Execution .

In addition to mitigating financial risks, internal controls can influence your company’s long-term operational and financial performance by safeguarding strategy execution.

Related: What Are Business Ethics & Why Are They Important?

3. Vague Strategic Goals

A common mistake when implementing strategy is underestimating the power of business goals and objectives .

According to a study by The Economist Intelligence Unit , 90 percent of senior executives say they failed to reach all their strategic goals because of poor implementation.

One example of a company impacted by poor strategy implementation is Target. Although a successful retail company, it had difficulty expanding into the Canadian market due to management’s inability to effectively communicate strategic goals, operational procedures, and differences in customer expectations to Canadian employees. As a result, Target had to close all Canadian operations .

You can help avoid such outcomes by using tools like the balanced scorecard .

“The balanced scorecard combines the traditional financial perspective with additional perspectives that focus on customers, internal business processes, and learning and development,” Simons says in Strategy Execution . “These additional perspectives help businesses measure all the activities essential to creating value.”

When paired with a strategy map —an outline of the cause-and-effect relationships that underpin your strategy—a balanced scorecard provides a roadmap for understanding the relationship between your business’s goals, measurements, and value creation .

Remember to define and outline your goals and objectives before implementing your strategy to ensure consistency and alignment throughout the execution process.

4. Lack of Organizational Support

No matter how great your strategic initiatives are, you can’t implement them alone. Successful strategy execution requires the support of employees, stakeholders, and customers.

One situation that exemplifies why it’s vital to gain employee buy-in before implementing high-level changes is JCPenny’s failed 2011 rebranding strategy . Under new leadership, the company tried to implement a strategy focused on modernizing stores and pricing models, which was met with internal resistance. Longtime staff and sales associates felt disconnected from the new direction. Many employees also didn’t understand the pricing strategy and weren’t adequately trained in the company’s latest sales tactics.

One of the most effective ways to earn your team’s support is by communicating your company’s core values —your business’s larger purpose that inspires and guides employee behavior—and how it aligns with your strategy.

“You may think of them as little more than window dressing or ticking a box without much real impact on the business,” Simons says Strategy Execution . “But I've learned that the best companies—the ones that are most competitive and lead their industries decade after decade—put enormous emphasis on their core values and beliefs.”

Examples of core values include:

• Diversity and inclusion
• Sustainability

By aligning strategy with purpose, employees won’t just support your strategic initiatives but be engaged in their work .

Related: 6 Strategies for Engaging Your Employees

5. Imbalance of Innovation and Control

Innovation is essential to your organization’s long-term success. However, it’s critical that innovative products and services don’t hinder your business strategy’s execution.

For example, Uber has historically struggled with balancing innovation and internal controls. While the ride-hailing company has transformed the transportation industry, its need for innovation has led to several instances of misconduct due to insufficient internal controls . In response to public criticism and regulatory scrutiny, Uber has taken steps to address those issues and placed greater restrictions on what employees should and shouldn’t do.

You can help balance innovation and control by setting strategic boundaries , which define your business’s desired market position by identifying opportunities it should avoid and pursue.

You might be overwhelmed by such decisions. In choosing what to do and not do, you might worry about stalling innovation throughout your organization. However, restrictions are more guidelines than constraints. Instead, they should ensure innovation aligns with your business strategy’s direction.

How to Succeed in Strategy Execution

Strategy execution doesn’t need to be intimidating. While many businesses have failed to execute their strategic initiatives, you can help ensure yours succeed by developing strategy execution skills .

By taking an online strategy course , you can build the knowledge and skills to reach your strategic goals. Through an interactive learning experience, Strategy Execution allows you to learn from real-world business examples to better understand the strengths and weaknesses of your organization’s strategy execution approach.

Want to discover more tools you can use to implement strategy? Explore Strategy Execution —one of our online strategy courses —and download our free strategy e-book to continue learning about how to avoid common execution mistakes.

About the Author

Why do business plans fail?

Table of Contents

Bad product ideas

Poor partnerships , a lack of detail , unrealistic financial planning , how a simple app can help improve your business plan.

Unfortunately, not every business will be a success. The failure of businesses is usually due to some issue in their business plan, and there are hundreds of different issues a business plan could have.

This article will describe some of the most common reasons a business plan might fail and how you can avoid them. We’ll look at common pitfalls such as:

• Poor partnerships
• A lack of detail
• Unrealistic financial planning

Sometimes, a business plan fails simply because it focuses on bad product ideas. A bad product idea means that the product or service your business specialises in does not sell well, and the lack of sales leads to an income problem for your business.

Business plans containing bad product ideas usually come about due to a misunderstanding of the term ‘ unique selling point ’. A unique selling point is what makes your product stand out from the products of the competition. It’s a feature that makes the product better as well as being unique. 

Many bad product ideas come from individuals that focus too much on the ‘unique’ part of the term unique selling point. While it is important to have a different product from anything else on the market, make sure you also know what your customers want from a product .

While it’s nice to have help running your business, it’s important to find the right person for the job before you write a contract for a business partnership . If you create a business plan as a partnership and your partner fails to fulfil their responsibilities, your business will struggle to succeed.

There are three things you may want to consider if you’re trying to avoid poor partnerships. The first is your partner’s skill set: look for someone with talents related to your business idea as well as talents you don’t possess. It’s helpful to have a diverse collection of skills within your business. 

Secondly, make sure your potential partner is as passionate about the business as you are. If they aren’t, you may find that you end up doing most of the work or that they leave the business as soon as things become difficult. While measuring passion and emotional investment is challenging, finding a business partner that matches your feelings regarding your business plan is vital.

Finally, create an exit strategy. While you may have found a perfect business partner, you never know what difficulties you’ll encounter in the future. So make sure you know what to do if there is an internal conflict in your company that you can’t resolve peacefully.

When you write a business plan , you need to make sure that you plan for almost anything. One of the biggest reasons business plans fail is because they don’t account for certain situations.

It’s impossible to plan for truly unexpected problems, but a detailed business plan will account for most situations by listing off your company’s weaknesses during a SWOT analysis . SWOT stands for strengths, weaknesses, opportunities, and threats, and it’s a standard part of most business plans. 

By using SWOT to list weaknesses in your business plan and potential threats to your success, you can start planning ways to deal with problems. For instance, you might identify a lack of sales as a potential threat. To account for this, you could invest in marketing or reduce your prices. If your business plan doesn’t account for these sorts of situations, it increases its chances of failure. 

Another reason for lack of detail in a business plan is low-quality research or not performing research at all. Without researching the market and industry you operate in, you’ll struggle to learn about your competitors or understand your customers’ needs. Thorough research is an essential part of avoiding business plan failure.

Financial planning is essential in business. You might not know the future of your business, but with a decent financial plan, you’ll be able to avoid most obstacles to success. If your financial plan is poorly thought-out or unrealistic, though, it might not be as valuable.

Financial plans are all about mapping out your company’s growth. If you’re too optimistic about this growth, it can cause serious problems. Unrealistic expectations can cause unprepared businesses to go bankrupt very quickly.

For example, say you expect to be making £1,000 a week in sales revenue by your second week of business. Your financial plan relies on this for you to pay rent and buy supplies. If it gets to that week and you’re only making £500, you’ll not be able to pay the bills that allow your business to operate. 

To avoid these problems, try lowering your expectations. Even if you think you have a fantastic product idea, it’s better to prepare for the worst than plan for the best and run into trouble. If you create a conservative financial plan that expects some success but accounts for things like low sales, your business plan is much less likely to fail. 

One of the biggest parts of your business plan is the financial aspect. To create a business plan that’s unlikely to fail, you’ll need to make sure you have a good understanding of accounting and a way to track how you’re spending your money.

The Countingup app offers built-in accounting software with its business account so that you can manage all your financial data in one place. 

With additional features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here .

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Strategic Planning Failure: Why It Happens and How to Avoid It

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There are more than  30 million small businesses  in the U.S. If I asked you to divide these companies into categories based on annual revenue, how many would fall into the $1-10 million revenue tier? How about $10-50 million or above $50 million?

These businesses comprise only about 4% of those in the U.S. The remaining 96% have less than $1 million in annual revenue. Unfortunately, only a small number of them will grow into the next tier. In fact, it’s so hard to move between categories, there are only 17,000 businesses with more than $50 million in annual revenue. Only 17,000 out of more than 30 million!

It leads you to wonder — why do some companies struggle while others blast through the ceiling and achieve phenomenal growth? What are common barriers that prevent companies from achieving this level of growth? The secret often lies in strategic planning.

In this article:

Top 28 Fatal Strategic Planning Program Flaws 

How to overcome strategic planning failure.

• Start Executing Your Strategic Plan With AchieveIt 

For some companies, strategic planning seems to be a rhetorical exercise in which everyone fills out a form at the beginning of each year listing the things they are going to accomplish. The forms are assembled into a tidy document and updated quarterly. It’s all very task-oriented. And while, yes, strategic plans contain tasks, without goals, objectives, and strategies to provide context, the tasks are meaningless. A strategic plan without measurable objectives is no strategic plan at all. 

Successful strategic planning means business elements are working together agreeably to contribute to these goals. For strategic planning to be successful, you need to understand the factors that play a role in strategic plan failure. We’ve gathered a list of the top 28 reasons why strategic plans fail. 

1. Premature Upscaling

Pushing your business outside of its limit is known as premature upscaling and may occur if you are impatient to implement a business venture, project, or strategy. Preparing your team to take on any kind of expansion before anticipating possible consequences can lead to disaster. Managing the effectiveness of your strategic plan means not taking it  beyond the reality  of what your business can handle. 

A practical internal organization should focus on a steady upscale by defining specialized roles, strengthening management structure, planning, forecasting, and sustaining culture.

2. Poor Managerial Skills or Lack of Leadership

Managers and leaders can heavily influence productivity, revenue, innovation, and turnover. Management that contributes to a lack of trust or low expectations can decrease employees’ motivation or performance, which can affect strategic planning. Managers can assist in creating a proactive environment by learning from their failures and encouraging experimentation. Promoting open communication and exchange of ideas may also help with improvement opportunities. 

Managers should be aware that  employees may not always come to them  when problems arise, so anticipating problems and engaging with employees to create solutions for strategic plans lets your team know they are a priority. Having suitable leadership can ensure your team’s commitment and buy-in to the process.

3. Zero Succession Plan

Many strategic plans are not executed well because the business doesn’t have a succession plan. A succession plan ensures the necessary resources and skills are available when needed for a business plan or transition. The absence of succession planning may leave your business exposed to  inefficient replacement options  for positions that need to be filled, as well as fewer training and opportunities for your hard-working employees.

Businesses with a  strong succession plan  may see more resolved conflicts, effective decision-making and a boost in employees’ qualifications to take over specific roles. 

4. Overwhelming Strategic Plan

A strategic plan that is too overwhelming may be just as ineffective as having no plan at all. Too many vague goals or action steps — such as “growth” or “increased revenue” — can create confusion and dilute specific instructions or paths to accomplishment. This lack of precision could make employees  less likely to make progress  on goals. A strategic plan can also seem overwhelming if it aims to accomplish too many objectives at once, making it more difficult to translate them into useful measures. 

Creating a specific plan with goals and means of achieving them may reduce the likelihood of concerns or the need for clarification in the future. Using specific objectives can help you develop a reasonable timeline for intended success. It may also assist your employees in feeling confident in their respective roles and positions.

5. Unrealistic Goals: All Vision, No Direction

Setting unrealistic goals may explain why your business strategy fails. Unrealistic,  immeasurable, or unquantifiable  aspirations can be difficult to put into action and contribute to a lack of organizational focus because employees may find it unmanageable to meet the requirements. Employees are more motivated by challenging but attainable and incremental goals that align with business resources and productivity. 

Aside from envisioning your goals, you need a plan for implementing them. So, after ensuring all the essential elements of your mission are accounted for in your goals, develop a plan for implementing them. This ensures your plan has a focused vision and a sense of direction. 

6. Focus on Structural Changes

A business that puts too much focus on structural changes may lose the opportunity to direct its energy toward decision-making and meeting goals. Rather than building new structures, it is important to work on developing effective processes for strategies. Structural changes may bring about more issues and conflicts that take away attention and time from the strategies that can help your business succeed. 

There are often limits to structural changes in organizational design, as it can take a long time to get everyone on board with the process to run smoothly. 

7. Lack of Empowerment

The formulation and execution of your business strategy may depend heavily on your employee’s confidence and positive thinking. Empowered employees may feel more motivated to collaborate and achieve a goal, which can have a direct impact on your strategic planning success. Leaders who implement empowerment may see an increase in connection and creativity. Developing an inspiring and innovative environment can increase adaptation to different work styles, which may lead to success.

8. Wrong Timing

A solid business plan considers when the time is right to administer action. Your business strategy may be equipped with the proper resources, planning, goals, and actionable measures. But if the timing in your market or industry is not optimal, it may be wise to contemplate implementing it at a different time. The timing of your  project often directly relates to success , so finding the ideal moment to bring your plan to life is important. 

9. Short-Term Planning and Losing Sight of Goals

In the hustle of day-to-day operations, employees may easily lose sight of the mission. This attention can hinder short-term goal planning when your employees only focus on daily activities rather than their purpose in the overall goal. 

Before establishing your business strategy, think about the big picture and general direction of where you want to grow. If you don’t set long-term goals, you may lose the ability to envision sustainability. Setting long-term plans and objectives can improve your short-term goals’ structures because you may be able to  narrow the focus  toward what you are trying to achieve. 

Most of the time, your business’s short-term goals will be very different compared to its long-term strategy, so you and your team should revisit goals regularly to keep everyone on track. Planning for your business’s future and adapting your daily actions to your strategic plan’s goals can strengthen your employees’ ability to maintain a broader perspective. 

10. Choosing the Wrong People or Relying Too Much on External Consultants

In any business, the employees and team members are the most important asset. Every business strategy, plan, and execution stage requires different skills, personalities, and capabilities. Choosing the wrong people to fill specific roles in your business plan may decrease productive methods and success.

A team of  external consultants  is almost always a good idea for collaborating on a business plan and ensuring success because strategic management decisions can be very challenging. However, strictly relying on external consultants, meaning those who are not a part of your business, may lead you to lose sight of your business goals and purpose. After all, no one knows your business better than the people involved in your internal organization.

The external structure, also known as the environmental subsystem, should interconnect with the internal structure of your business to maintain consistency and work to improve intended progress. Internal consultants may be more beneficial for your business, depending on the size of your project or business plan. They may have a better idea of how to allocate resources and take a specific approach.

11. Lack of Communication or Lack of Clarity on Actions Required

When strategies fail, it is often because of a lack of communication. Communication keeps everyone on the same page. To communicate effectively, you must understand what information is relevant and important when notifying your team of updates, issues, or changes on a project. 

In businesses where a lack of communication contributes to the limitations of strategic planning, employees may feel confused about their roles and responsibilities. They may also feel disconnected when attempting to collaborate, which can lead to poor execution and confusion on context and outcomes. A method of storytelling can be effective in this case to put facts, strategies, missions, or  operational planning  directives into a structure that people can relate to and understand. 

Another crucial part of communication is accountability. Around  91% of employees  would say effective accountability implementation is one of their company’s top leadership development needs. Clearly communicating what employers are accountable for is essential, considering  60% of workers  report higher levels of mistrust with leadership when faced with a lack of communication surrounding accountability.

12. Inadequate Monitoring

Monitoring the development of planning and progress for any strategy can keep you aware of when changes need to be made. Determine which factors will have a significant impact on the success of your business to create a timeline of when critical tasks need to be completed. Proper monitoring allows for the opportunity to notice alternative solutions and predict long-term performance. Keeping your strategies and objectives on track may help prevent problems and enable you to revise or update plans as necessary. 

Monitoring your financial key performance indicators (KPIs) is another great way to be proactive and add value to your daily activities. 

13. No Progress Reporting

Reporting progress is another effective means of communication that contributes to staying on track with meeting your goals. A progress report updates the right people on the status of certain projects or task completion. Without it, there can be confusion and concern surrounding productivity. 

Progress reporting can also provide an overview of your team’s accomplishments and areas that need improvement. Constructing a regular analysis of your team’s performance, spending and profits can provide insight into how you compare with competitors. 

14. Lack of Alignment

Strategic alignment means that all crucial elements of a business are working together to support long-term goals. If employee performance is not aligned with your company goals and important strategic plans, it may present another obstacle to success. Misalignment in your business can create a disruption in focus, unclear goals, and conflicting tasks. 

Employees need to understand how their responsibilities fit into the success of a strategic plan or mission. Creating clear, established intentions may help you develop alignment with what your business aims to accomplish. 

15. Strategy You Can’t Execute

Before wasting time, energy, and resources on a strategic plan, consider if it is truly worth executing. Vague ideas or goals won’t usually produce anything successfully, so analyze your plan to see if it is capable of creating real change. Your strategy should be flexible and leave little opportunity for disruption. 

Your business may be too focused on seeing rapid results that it may not take the time to develop capabilities and innovation techniques. A worthy, solid strategy will take time to develop and may even require fundamental changes to your business. 

16. Unforeseen External Circumstances

Unpredictable occurrences should, ironically, be expected. If your company is not comfortable with confronting unforeseen external circumstances, it may explain why your strategies fail. Learning to anticipate risks or unfavorable opportunities can strengthen your ability to prepare a more secure strategy in the future. It is wise for your business to continually adapt its resources to suit a changing environment. 

Leaders and managers should devise a plan that highlights any uncertainties or possibilities for changing demands and competition to reduce the chance of failure from an external source.

17. Flawed Strategy

Implementing an incomplete or inconsistent plan is another possible reason why your strategic plans fail. A poor match between strategy and organizational  core competencies  may prevent you from seeing the growth and success that you desire. Testing your strategy with logic and a discernable vision can help determine if there are flaws in your strategy and how to address them.

Look to past situations and failures to see where you might notice defects in your current business strategies. You may jeopardize your business’s advancement if you rush to execute a strategy that hasn’t been well thought out.

18. Allowing Planning to Kill Strategy

The planning process allows you and your employees to demonstrate the goals you have in mind and how they can be achieved. However, too much planning — or too much focus on it — might dilute the importance of your strategy execution. At some point, you need to shift the overall focus to the strategy itself and how it will be executed to meet the desired growth.

Many managers and leaders may take too much time during the planning process trying to perfect every tiny detail. While this is admirable, it can also cause a delay in getting your anticipated results. Strategy execution should not be confused with planning, as they are completely different parts of the process of strategic analysis. Planning usually consists of an organized list of initiatives with associated budgets, resources, and deadlines. The strategy involves implementing specific decisions that lead to sustainable competitive and financial advantages.

19. Disorganized or Poorly Written Plan

A poorly designed plan will most likely lead to poor execution, which may cause strategic plan failure. Sufficient research and development of a plan with expertise and direction can be a part of the process of refining and organizing it. A jumble of to-do lists that are not coordinated and have no stated objectives may only cause your team to take longer to come up with a proper arrangement. This is also where accountability comes in — Ensure team members understand their responsibilities. 

20. Incremental Thinking

While incremental goals and growth may be a positive aspect of strategic planning, incremental thinking is usually not. This method of thinking usually consists of waiting for immediate, linear results and is generally unrealistic. It’s a more traditional process that may cause you to expect progress because you think you are making the right decisions.

Before implementing your business strategy, consider practicing an exponential mindset. Exponential thinking allows you to assess your growth in terms of its journey rather than overnight results. Exponential projections are not always certain and may not always meet your expectations as reliably as incremental thinking, but they  focus on working differently instead of working better . You can practice patience and alignment in your business, bringing about the opportunity for innovation.

21. Insufficient Focus

Another fatal flaw in strategic planning is insufficient focus. Employees who have too many widespread tasks may not know what to prioritize or what objectives are most relevant. Staying consistent with communication and reflecting on your business’s values and mission can be a helpful reminder that keeps team members on track.

Leadership may also focus too much on internal issues that don’t relate to their goals, such as resolving conflicts and sustaining performance. Too much internal attention can mean leaders fail to acknowledge competition markets and trends in technology. Focusing on the necessary elements of your strategic plan is key to maintaining the dynamic in your business, but  70% of leaders review their strategy  on an average of only one day a month. Spending too little time focusing on your prime concerns may lead to strategic failure.

22. Prioritizing the Wrong Things

While outlining specific priorities and goals is essential for strategic planning, it is crucial to prioritize the right things. Your priorities should directly align with your strategic business plan and have an obvious connection to how your company will succeed through particular steps and tasks. Explaining your priority objectives in detail and why they matter to your organization can help you understand if they truly are important.

It’s also normal for priorities to change throughout the process of implementing your strategic plan. Your goals may occasionally need to be restructured due to industry changes or financial impediments, so it’s a good idea to revisit your primary concerns regularly to see if they still match up with your current progress.

23. Insufficient Research

A lack of proper research may present problems down the line when executing your strategy. This type of research may include competitive industry markets, a review of your company’s resources or a look at your company’s financial performance. It is important to consider all possible elements of your strategic plan so you can better predict challenges and obstacles.

Strategic research planning can also be helpful to  define the resource and budget needs and possible outcomes before beginning a project. Leaders who prioritize research help ensure that all the important elements of a plan are accurately measured and completed. Emerging industry trends and changes can also be identified and updated according to your business plans with appropriate research. A lack of research could lead to a deficient comprehensive strategic plan because of failure to highlight related interactions, pressure points, and dependencies.

24. Putting Financials Ahead of Ideas

Improper use of resources is another factor in the list of fatal flaws. Tracking financial performance keeps you prepared for unexpected or unplanned events. However, being so concerned with your cash flow that you neglect ideas that could grow your business can cause you to pause your business plan or scrap it altogether.

Consistent poor cash flow management can also prevent you from making impactful decisions, finding resolutions, and predicting a prospective financial outlook for your business. It may also keep you from being able to participate in new business opportunities. Staying on track with your finances and managing them sensibly may make it easier for you to take on new tasks and projects without seeing a depletion of resources.

25. Failing to Make Trade-Offs

Strategies require making decisions that are difficult but necessary. Making trade-offs is very common and essential in most businesses and involves choosing one option or action over another. This ensures that your revenue, time, energy, and resources are going to the tasks where they can make the most impact.

For example, if your employees work toward many different, widespread goals or missions, there may not be much progress on your primary strategic plan. Failing to make trade-offs can prevent you from being able to allocate your resources to your most important key projects and objectives. Trade-offs also allow you to  determine which goals may conflict with each other , which risks you are willing to take, and which ones are not worth the possible loss.

26. Putting Too Much Value on Your Central Idea

Putting too much emphasis on one goal also has drawbacks. While it’s important that your team keeps your central idea or goal in mind, it should be flexible and adaptable. Having a backup plan can help add some security to your strategy and address concerns from your team.

It is also crucial to remember that strategies cannot be perfect, and leaders and managers can’t know every conceivable aspect of what may occur in the future. Putting all of your focus into one central idea will not give you much room to modify or adjust when issues arise or variables change.

27. Using Unrealistic Models

Setting unrealistic goals is another reason why strategic plans fail. Goals or models that seem unattainable may decrease motivation in your employees and slow productivity performance. Setting actionable, measurable goals can make your team feel like they can accomplish something while being challenged at the same time.

Your strategic planning models should be aligned with your intentions, but they should also be flexible. Your employees should be able to develop these ideas and results upfront and be equipped to face unexpected obstacles. Use common sense and intuition in the decision-making process to create realistic models and goals.

28. Failing to Link Strategic Planning to Strategic Execution

A solid strategy usually consists of adequate planning, organization, and delegation of tasks. To see success, you need to connect your strategic plan to your strategic execution. When managers or leaders become strictly reliant on their strategic plans, it may become more difficult to adapt to the external environment due to increased rigidity and inability to emphasize action.

Failing to link strategic planning to strategic execution may also decrease innovation. Innovation is a common link between strategy and performance, which may help you keep that connection when moving from the planning to the execution stage. Another part of this link may incorporate reviewing expected results and ensuring everyone stays engaged with the procedure and implementation process.

Combatting any obstacle can feel like a challenge, but it can also show you how to strengthen your abilities and become more successful. Seeing your plans develop may reinforce your feelings of accomplishment, making you more confident and secure in your future strategies. Here are a few methods on how to overcome strategic failure and improve overall problem-solving in your business.

1. Reflect on the Failure

The trial and error process is vital to learning, growth, and success. In business specifically, it’s normal to encounter failure, and it’s something you’ll have to accept. Think of failure as an opportunity to learn, recover, and shift your mindset to your next steps. 

Experiencing failure can supply you with the ability to become  stronger and more knowledgeable  throughout the entrepreneurial learning process. Research suggests that failure can give you a better lens for future-orientated learning outcomes. Applying and utilizing what you have learned from your past mistakes can help you generate an early warning system that allows you to anticipate ways to correct your actions.

2. Take Responsibility

As a leader, admitting you have made a mistake or could have done something better is not always easy. But owning up to the situation instead of blaming outside factors will make you appear more responsible. Being willing to embrace accountability rather than focusing on a victim mentality can make you more resilient in the future. 

Taking accountability may even  produce positive results , such as:

• Improved solutions.
• A boost in creativity.
• Employee commitment and participation.
• Employee morale and satisfaction.

If you struggle with taking responsibility, think about the impact it may have on your employees. Setting a good example and enforcing the importance of accountability will provide a more solution-oriented environment, especially in the wake of a strategic failure. 

3. Create Feedback Loops and Get Feedback

It’s not always easy to hear or accept feedback from your peers. However, the value of feedback proves to be quite the opposite. If you struggle to appreciate the feedback process, know it can be essential for learning and developing at any stage of your career. When you receive knowledge and opinions from others, it can help you think of a new perspective or idea you hadn’t previously considered. 

Creating an environment that encourages friendly but constructive criticism can have many benefits, including:

• Providing clarity for employees.
• Acknowledging the hard work and effort of others.
• Communicating what can be changed.
• Reinforcing and motivating employees with innovative ideas.
• Encouraging employees to review and adjust their goals.

Receiving advice should be seen as an opportunity to overcome areas of weakness. The Pendleton Model suggests that an action plan or specific goal  should be the top priority  when giving or receiving feedback. This model can refine the communication process — the more feedback you receive, the more you can think and reflect on the most efficient improvement methods. 

4. Use Your Support Network

Building connections with people who have different opinions and perspectives is a great way to feel supported and manage stress. A study revealed that  social support can improve psychological resilience when you are faced with stress, adversity, or failure. With a positive social support network around you, you may be less likely to:

• Engage in risk-taking behaviors.
• Feel socially isolated, which can lead to depression.
• Use or rely on negative coping mechanisms.
• Have negative thoughts about yourself or your abilities.

A team of motivational peers, friends, coworkers, or family members equips you with a sturdy structure for authenticity and encouragement. 

5. Recognize That Strategies and Plans Can Change

The willingness to accept change is also something that requires effort and patience. To improve the culture of your business, organization, or practice, you must be open to change. This concept may seem difficult to implement if you are used to a specific structure, direction, or position. However, change is almost always a perfect opportunity to enhance productivity and efficiency.

When approaching change, it’s a good idea to think of it as you and your team conquering a challenge or creating a vision together. Celebrating the small wins, maintaining a positive attitude and staying focused on your goals will make embracing new and intimidating changes easier.

Venturing out into a new strategy or business initiative may cause you to long for the comfort of predictability and the traditional way of doing things. But change can also make you feel more empowered, strengthening your ability to adapt to your environment and make more conscious choices. 

6. Manage Business Expenses

Staying on top of your business expenses can prevent you from dealing with financial problems in the future. Creating a  money management plan  can keep your payments and charges organized. Having control over your finances will save you time and energy that you can instead devote to your business strategy. Examples of managing your business expenses can include:

• Having a dependable payroll system.
• Hiring a reliable accountant to assess financial performance.
• Having an accounting or bookkeeping system.
• Regularly check your financial reports, such as income statements and balance sheets.
• Ensuring you are adhering to federal, state, and local tax regulations.
• Managing cash flow.

You will have one less thing to manage if your business expenses are handled by a credible, trustworthy professional. 

7. Create an Improved Execution Process

Learning from past mistakes is a powerful tool for improving your future plans and initiatives. Individuals often  resist change , which may present problems such as counterproductivity and ineffective job performance, which is why many strategy implementations fail. 

Once you decide on your next step toward a goal, following up with attentive communication and follow-through is essential to staying on top of a successful strategy. A few steps to  creating an improved execution process  may include:

• Identifying critical vulnerabilities.
• Communicating priorities and success factors.
• Creating an outside perspective of your business.
• Considering financial impacts.
• Acknowledging competitors.

These steps may help clear up any miscommunication and create transparency within your business or organization. Knowing how to properly delegate and implement your vision and direction can be one of the most successful methods for overcoming failure. 

Prioritize Your Business’s Success With AchieveIt’s Strategic Planning Solutions

Any successful business understands the importance of a well-constructed strategic plan. At AchieveIt, we want to help you increase visibility, improve accountability, and establish uniformity with our strategic planning software. Our strategic planning management platform will allow you to turn your strategic plans into reality by providing tools that ensure your key plans and projects progress. With our software, you can spend less time collecting updates and more time making decisions to move your organization forward.

If you want to improve the way you execute your strategic business plans, contact us today or schedule a free demo to see how we can help you achieve more.

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Written by Grant Olsen | February 2, 2022

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There are all kinds of conflicting statistics and opinions for why businesses fail . The headline of one report might proclaim that “90% of businesses fail in the first 3 years,” while another asserts that by following their tips, “You can enjoy a 90% chance of success.”

It’s difficult to accurately aggregate the numbers and find global statistics on business failures, so we’ll use the United States as a microcosm for trends that are also relevant in Australia, New Zealand, Canada, the UK, and other parts of the world.

Here’s a look at survival rates when viewed at the end of the first, fifth, and tenth years:

• 80% of businesses survive their first year
• 50% of businesses survive 5 years or longer
• 33% of businesses survive 10 years or longer

While these statistics highlight the fact that there’s certainly a risk of failure, they’re higher than some of us might expect. Anytime you’re looking at a vast collection of disparate individuals attempting something difficult, you’re going to see similar trends.

For example, let’s look at how many first-time college students seeking a 4-year degree stay the course all the way to graduation day:

• 33% of students graduate with a bachelor’s degree in 4 years
• 57% of students have graduated with a bachelor’s degree by 6 years

Some of the remaining 43% of students who didn’t graduate within 6 years will likely go on to attain their degree in later years, but it’s too inconsistent of a number to show up in most studies. For thousands of different reasons, hundreds of thousands of students fail to attain their bachelor’s degrees.

So the percentage of businesses that survive 5 years or more is strikingly similar to the percentage of students who earn a degree by 6 years. Sure, things happen that derail many of the businesses and students. But at least half of them are still standing after 5-6 years.

Why Small Businesses Fail to Change

Just as many of those students who earned degrees switched majors during their college experience, it’s critical for business owners to maintain flexibility in their structure and operations. If the COVID-19 pandemic has taught us anything, it’s the immense value of a well-time pivot. Whether your change is compelled by a new idea or the pressures of the times, never hesitate to innovate.

As Dan Fries explains :

Sometimes a crisis, while always tragic, can force some positive effects. It might not feel like that right now, but by responding to COVID-19 will teach you some valuable skills. In other words, this is not the only crisis you are going to face as your business grows, and the lessons you learn in the next few months will be extremely useful when it comes to scaling your startup further down the road. In fact, some of the tools and processes above are likely to be relevant long after the current pandemic has passed.

When businesses embrace this open-minded approach, they usually find themselves among the 50% that are still strong after 5-10 years. As the old saying goes, “If you’re flexible, you’ll never get bent out of shape.”

Yet many business owners remain rooted in their old ways. It’s understandable that they believe in their products or services, and are attached to the business model. After all, it was these elements that inspired them to take entrepreneurial risks in the first place.

But if you love something, you need to take care of it. And part of nurturing your business is being willing to change directions when outside pressures are threatening it. Stubbornness can be mildly amusing in childhood friends or cranky great-uncles, but it can be devastating for a business.

Why do businesses fail when they resist change? Because they’re refusing to acknowledge the primacy of the customer. Let’s review a few examples of roadblocks to success that arose during the pandemic, and how they all connected back to the role of the customer:

• Lockdown prevents a restaurant from serving customers inside the building. This scenario has played out again and again in nations around the world. It presents many dilemmas, but none larger than the inability of a business to directly serve its customers. Successful restaurants found ways to provide new pickup and delivery options, serve their communities, and even send meal kits by mail. They kept providing a quality product, though it might’ve looked much different.
• The supply chain is disrupted. The inability to source the materials or ingredients necessary for your current model is problematic. But the main issue is that it prevents you from delivering what your customers are seeking. If replacements couldn’t be found for the supply chain, a pivot was required. For example, a bakery that couldn’t source eggs might stop selling baked goods and begin selling dry mixes to customers.
• Depleted finances make it harder for customers to make purchases. With customers in many areas struggling to meet financial obligations such as rent and mortgages, it’s no wonder that some had to curtail purchases. By finding ways to lower costs so you can lower your prices, introducing tiered pricing, or creating new product options altogether to meet your customers’ needs, successful businesses continued to meet the needs of those who historically had depended on them.

Whether you’re struggling with cash flow issues or have a broken supply chain, your ability to deliver for your customers will always be the real issue. And discovering new ways to meet their needs will always be the real solution.

The fact is that pandemics will emerge, trends will evolve, and economies will fluctuate. So if you insist on moving your business forward in the exact same way regardless of these external factors, you’ll instead find your trajectory rapidly nosing downward.

The alternative is to commit to meeting your customers’ needs no matter what occurs. While it won’t guarantee a smooth journey, this North Star will guide you through all manner of catastrophes and downturns.

9 More Reasons Why Businesses Fail

We’ve identified the inability to adapt to their customers’ needs as a major contributor to businesses that go under before reaching their 1-year, 5-year, and 10-year anniversaries. When your customer is kept at the forefront, all your other efforts will steer you in the right direction.

But there are many other specific risks facing young businesses. These are risks that you should anticipate early and be on the alert for as time goes on.

With that in mind, let’s now look at 9 other reasons why businesses fail:

1. Poor Planning

Coming up with a great business idea is only the first step because it can’t go anywhere unless it’s supported by a solid plan . Outline where you’ll go in your first month, first 3 months, first year, and first 3 years. Make the milestones measurable so that you’ll know if you’re on track.

Of course, things will occur that necessitate updates to your plan. But the point is that you have a master document that outlines how you’re going to stand out from the competition, how you’re going to deliver value to customers, how you’re going to build your culture, and how you’re going to ultimately thrive.

2. Hiring the Wrong People

We get it—there’s a lot of pressure to build your team in a timely manner so that you can launch a business. But rushing this stage can kill your chances for long-term success.

You need to find people who believe in what you’re doing and have the skills to improve the ways you’re doing it. In the crucial early stages of a business, negative employees can quickly sink morale and overall performance.

3. Failing to Foster a Good Culture

As you assemble your team, communicate openly about the culture you’re seeking to build. Ask their opinions and make a point of incorporating new ideas from your team. The businesses that prioritize profits over people or have a leaders-versus-employees dynamic often fall by the wayside because their toxicity trickles right out of the office and can be sensed by suppliers, partners, and ultimately, customers.

4. Growing Pains

Plenty of defunct companies launched with a strong culture but lost it as the company scaled. There’s obviously no way to maintain all your team’s perks and traditions as new employees swell the ranks, but you can keep the heart of who you are.

Make sure that you continue seeking your team’s input and act on their ideas. New hires will bring innovative suggestions to make things better, while the old guard can share the things that you should most think about retaining.

5. Failure to Stand Out

Even if your business idea is a gem, you’ve still got to communicate it effectively to your audience. Otherwise, you’ll just get lost in the shuffle.

Using the market research from your business plan, craft a unique selling proposition that boldly articulates what makes you different from the rest. Questions to answer include:

• What unique value do I offer?
• Why is my solution better for customers?
• How can I communicate these important differences?

The more you can differentiate your brand, the better your chances for success.

6. Not Focusing on the Essentials

Plenty of businesses lose their way in the first year as distractions pull them from the very things that give them a competitive edge. For example, if your quirky product packaging is beloved by customers, don’t ditch it as your business grows. Instead, find ways to make the packaging more efficient so that it complements your efforts to scale.

When your business stays focused, you’re better able to deliver on your unique selling proposition and to adapt to unforeseen bumps in the road.

7. Not Controlling Expenses

Launching a business is expensive. And growing that business involves a whole new set of financial demands. So it’s understandable that many businesses struggle to keep up with the pace.

You’ll put yourself in a much stronger position by carefully watching your expenses . If something doesn’t help you deliver an even better experience to your customers, it might not warrant the cost. This goes for everything from Netflix on the breakroom television to the vehicles you rent on business trips.

8. Not Managing Inventory

Balancing acts are hard enough for any person, which is why those who perform on the trapeze are referred to as “artists.” But business owners must control the inventory so they don’t lose sales from insufficient numbers or burn through capital by allowing too much inventory to pile up.

You can avoid these fates by investing in inventory management software that helps you track items through the supply chain, in your warehouse, and all the way to final deliveries .

9. Inadequate Profit Margins

It’s possible to bring in substantial revenue and still find yourself in financial danger. One of the factors that have claimed many young businesses is inefficient processes and poor pricing strategies that lead to low profits.

Your business provides distinct value to customers, so you should feel confident setting prices that reflect this fact.

Get the Skills That Won’t Let Your Business Fail

Want more strategies to help your business excel? We’ve prepared a library of free business courses that cover everything from finance to negotiations to advertising. Taught by proven entrepreneurs from a range of industries, they provide the type of insights that usually take years to acquire. In this way, you can fast-track your success and avoid many of the threats that impact other businesses in their early years.

About Grant Olsen

Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

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6 Reasons Why Small Businesses Fail and How to Avoid Them

7 min. read

Updated October 29, 2023

Roughly 20% of small businesses fail in their first year, according to recent U.S. Bureau of Labor Statistics data . About 50% fail in the first five years, and only one-third of new businesses are able to survive for 10 years. Research by the Small Business Administration found that about 1 in 12 businesses close in America every year.

If you’re a small business owner, another way to think about these statistics is that 80% of small businesses will survive their first year. Over five years, you have a roughly even chance of survival or failure. Looking out 10 years, you have a one-in-three chance of enduring.

What are the reasons businesses fail to thrive, given a 50/50 chance of survival and assuming a product or service for which there’s a demand? Let’s discuss six reasons businesses fail and some ways you can avoid business failure.

• 1. Leadership Failure

Your business can fail if you exhibit poor management skills, which can be evident in many forms. You will struggle as a leader if you don’t have enough experience making management decisions, supervising a staff, or the vision to lead your organization.

Perhaps your leadership team is not in agreement on how the business should be run. You and your leaders may be arguing with each other publicly, or contradicting each other’s instructions to the staff. When problems requiring strong leadership occur, you may be reluctant to take charge and resolve the issues while your business continues to slip toward failure.

How to Avoid Leadership Failure: Dysfunctional leadership in your business will trickle down and affect every aspect of your operation, from financial management to employee morale, and once productivity is hindered, failure looms large on the horizon.

Learn, study, find a mentor, enroll in training, conduct personal research—do whatever you can to enhance your leadership skills and knowledge of the industry. Examine other business and leadership best practices and see which ones you can apply to your own.

2.  Lacking Uniqueness and Value

You may have a great product or service for which there is strong demand, but your business is still failing. It may be that your approach is mediocre or you lack a strong value proposition. If there’s strong demand, you probably have a lot of competitors and are failing to stand out in the crowd.

How to Avoid Value Proposition Failure: What sets your business apart from competitors?  How do you conduct business in a way that is totally unique? What are your competitors doing better than you are? Develop a customized approach or service package that no one else in your industry is using so you can present it as a strong value proposition that attracts attention and interest.

This is how you build a brand . Your brand is the image your customers recognize and associate with your business. Your brand identity, including your logo, tagline, colors, and all the visible aesthetics and business philosophies that represent your company should be supported by your value proposition. It should separate you from the pack and present your individual perspective to your customers. Do everything you can to present that unique value proposition to your market so you can capture a market share and begin building your conversion rates.

To publicize your brand and set yourself apart, you will also need to step up your marketing plan and use as many venues as possible to present your brand to the public. You may be far better than your competitors but that won’t make any difference if your prospects don’t even know you’re in the game. Use social media, word of mouth, cold calling, direct mail, and other tried-and-true marketing techniques. Ensure you have a well-optimized online presence, develop lead generation and contact information capture techniques such as offering high-quality content on your site, a subscriber newsletter, and information giveaways.

3.  Not in Touch with Customer Needs

Your business will fail if you neglect to stay in touch with your customers and understand what they need and the feedback they offer. Your customers may like your product or service but, perhaps they would love it if you changed this feature or altered that procedure. What are they telling you? Have you been listening? Or is the market declining? Are they even still interested in what you’re selling? These are all important questions to ask and answer. Maybe you’re offering a product or service that is fallen well below trend.

How to Avoid Losing Touch with Customers: A successful business keeps its eye on the trending values and interests of its existing and potential customers. Survey customers and do market research and find out what their interests are and keep abreast of changes and trends using customer relationship management (CRM) tools. Effective use of CRM can help keep your business from failing.

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4.  Unprofitable Business Model

Akin to leadership failure is building a company on a business model that is not sound, operating without a business plan , and pursuing a business for which there is no proven revenue stream. The business idea may be good but failure may come in the implementation of the idea if there are no strategic guidelines in place.

How to Build a Good Business Model: Research and review the way other businesses in the industry operate. Develop a complete business plan that includes financial forecasting based on predictable revenue, strategic marketing, and challenge management solutions to overcome potential obstacles and competitor activities. Create a milestone chart with specific tasks and objectives assigned along the timeline so you can measure success, solve problems as they occur, and stay on track. A sound business model that incorporates best practices can help your business avoid failure.

5.  Poor Financial Management

SmallBizTrends.com, a business news resource, offers this infographic which states that 40 percent of small businesses make a profit, 30 percent come out even, and the remaining 30 percent lose money.

You must know, down to the last dime, where the money in your business is coming from and where it’s going in order for your business to succeed. Your business can also fail if you lack a contingency funding plan, a reserve of money you can call upon in the event of a financial crisis. Sometimes people start businesses with a dream of making money but don’t have the skill or interest to manage cash flow , taxes, expenses, and other financial issues. Poor accounting practice puts a business on a path straight to failure.

How to Avoid Financial Mismanagement: Use professional business accounting software like QuickBooks or Xero to keep records of all financial transactions, including every expenditure and all revenues received, and use this information to generate income statements (profit and loss statements). Even better if you use a business dashboard tool like LivePlan that makes it easy to monitor your financials. This is valuable information that you need to run your business, know where you stand at all times, and keep it operating in the black. If you lack skill in financial management, consider hiring a small business advisor and professional bookkeeper or certified public account to help manage your financial affairs.

6.  Rapid Growth and Over-expansion

Every now and then a business startup grows much faster than it can keep up with. You open a website with a trending product and suddenly you are inundated with orders you are not able to fill. Or perhaps the opposite is true. You are so convinced that your product is going to take the world by storm that you invest heavily and order way too much inventory and now you can’t move it. These are both additional paths to business failure.

How to Avoid Growth and Expansion Problems. Business growth and expansion take as much careful and strategic planning as managing day-to-day operations. Even well-established and successful commercial franchises such as fast-food restaurants and convenience stores conduct careful research and planning before opening a new location. They measure local and regional demographics and spending trends, future development plans for the area, and other pertinent issues before they move forward. You must do the same for your business to avoid failure.

Conduct thorough research to ensure the time is right and the funding is available for expansion. Make sure the initial business is stable before expanding to an additional location. Don’t order inventory you’re not sure you can sell but have a plan already in place to fill orders quickly should the demand present itself. The key to successful growth and expansion—and avoiding business failure—is strategic planning.

• Avoiding business failure starts with planning

If 50% of new businesses fail, then 50% of new businesses can succeed. Starting a business is an exciting endeavor that requires a clearly defined product or service and a strong market demand for it. Whether you desire to start a new business or you’re already running a business, you must understand that success depends on careful strategic planning and sound fiscal management that begin prior to startup and continue throughout the life of the business.

Clarify your ideas and understand how to start your business with LivePlan

Mike Kamo is the VP of marketing for Strideapp. Stride is a Cloud-based CRM and mobile app that helps small- to medium-sized agencies manage and track leads, as well as close more deals.

Table of Contents

• 2.  Lacking Uniqueness and Value
• 3.  Not in Touch with Customer Needs
• 4.  Unprofitable Business Model
• 5.  Poor Financial Management
• 6.  Rapid Growth and Over-expansion

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July 2, 2021

Why Do Strategic Plans Fail? 5 Mistakes And How To Counter Them

UPDATED: As of 4 May 2022

When 70% of change programs fail to achieve their goals , it’s easy to get overwhelmed and shy away from strategy altogether.

But after working with over 1,000 companies in the past decade, Step Change has seen our fair share of clients whose strategy execution has created millions of dollars of incremental value — period on period, year after year. So we know that successful strategies aren’t simply urban legends.

And yet, some still fall through the cracks. So, what makes all the difference?

In this article, let’s take the time to look into the reasons that are preventing companies from successfully executing their strategic plans.

Bonus Video: Let Step Change CEO Ashton Bishop walk you through what makes an ineffective strategy.

Insight: Firms seldom achieve the expected results of their plans because of the gap between strategy and effective execution. Data: 80% of leaders feel their company is good at crafting strategy but only 44% can say the same about their implementation. On top of that, only 2% are confident that they will achieve 80–100% of their strategy’s objectives. ( Speculand ) Key Action Point: To execute strategic plans effectively, today’s executives and business leaders need to have the foresight to outline a well-structured strategy and work towards achieving an alignment with everyone in the organisation.

Why Do Strategic Plans Fail?

Here are the top five reasons why your strategy could be creating more wastepaper than actual value.

1. Lack of strategic focus

Many companies set unrealistic goals, and that compromises their focus. Without a strategic focus in place, it can be tricky to set a clear measure for success. That means losing out on valuable time and wasting critical resources.

Gartner found that around 56% of the time spent on strategic planning is wasted . To counter this, it is important to first understand your organisation’s strategic purpose.

This is where the strategic radar comes in. A strategic radar is a tool that paints a clear picture of your external and internal challenges and opportunities on a single page. At the heart of it sits your purpose. This enables you to gather key information and examine the context needed to understand where you are and where you need to be.

Recommended article: The Death of the SWOT Analysis and the Rise of the Strategic Radar.

2. Poor communication

What are your organisation’s core goals and objectives?

If you find that you or any of your team members are unable to communicate those clearly — chances are, not everyone is on board with what’s going on and are unsure about what you’re trying to achieve.

When 95% of employees do not even understand their organisation’s strategy or objectives, and with only 27% of employees having access to their company’s strategic plans — it’s no surprise that companies fall short of their goals.

Most plans fail because of poor communication between the management and their teams. The challenge here is to communicate your strategy across the organisation so everybody can get on the same page, together. This makes effective internal communications just as critical as the strategy itself. Outlining your strategic plans and decisions in an accessible, easy-to-share one-pager with your team is a great way to keep communications clear and aligned.

3. Forgetting to manage business as usual

Who doesn’t want to transform things for the better? Change and the potential for success can be exciting. But getting caught up with new goals and plans is a mistake that often drives the organisation away from existing business initiatives.

In strategic planning and execution, it is important to consider and acknowledge your existing business efforts and the role they play in your overall strategy. Better yet, include your existing programs in your strategic plan. Then draw a line and determine which initiatives coincide with your strategy. From there, establish clear timelines to measure the success of your new and existing business initiatives.

4. Lack of alignment

More than 60% of organisations do not link their strategic goals and objectives with their budget.

This is just one of the many areas in which a lack of alignment can make or break the results that you’re looking to achieve. Another example is alignment between management and teams.

You’re not setting yourself up for success when 20% of staff members resist implementation initiatives . If your employees are not 100% on board with your strategic decisions, it is highly unlikely that they’ll be able to execute your plans effectively.

Many teams and departments develop strategic plans that are not at all linked to the existing or bigger picture, which says a lot about the need for strategic alignment in organisations.

Ensuring alignment with all the critical stakeholders in your organisation not only gets you faster to where you need to be but also helps you paint a clear picture of what success looks like for everyone involved. This becomes a great opportunity to come up with the best solutions and techniques to deal with critical problems and issues that might come with change.

5. Not celebrating wins

Tracking and measuring success is a great result of setting up a clear strategic focus. After all, organisations must celebrate wins, no matter how little they may be.

Celebrating wins is a sure way to boost your team's satisfaction. For one thing, it reassures teams that their hard work had not been in vain. And it inspires them to do better knowing that everything they do brings them closer to where they need to be.

More importantly, celebrating the small goals also gives you the opportunity to reinforce alignment on important goals. It also addresses any pressing issues and setbacks that may be stopping you from executing your plans from start to finish.

And by celebrating these successes along the way, you highlight the importance of strategy and its execution across the entire organisation, so everyone is ready to face the next challenge head-on.

Tying It All Together

Whether you struggle with unrealistic goals, poor communication, managing existing initiatives, lack of alignment or a lack of celebration — the trick to overcoming these key strategic mistakes is not to pull a rabbit out of a hat.

Great leaders know that strategy isn’t smoke and mirrors, but dedication and mastery of key foundations. This is how you are able to understand the context you are working in and come up with a solution to navigate it. Focusing on five key areas, Lockstep Baseline is the free business health diagnostic tool designed to help you gain the alignment and clarity needed to win in just three minutes. Time is of the essence, so cut through the noise and nonsense with Lockstep Baseline. Get your strategic roadmap within three minutes for free today.

Download our 5 Reasons Your Strategy Is Failing And How To Counter Them One Pager

Identify common strategy mistakes in your organisation and counter them before they escalate with Step Change’s 5 Reasons Your Strategy Is Failing And How To Counter Them PDF. This free one-pager:

• Points out the signs of poor strategy
• Describes how they manifest in organisations
• Identifies the ways you can solve them

Get your copy today.

Written by Ashton Bishop

Ashton Bishop is Australia’s Predatory Thinker — an expert in pinpointing how businesses can grow by outsmarting their competitors. His niche is in strategy, where he has spent the last 20 years working internationally on some of the world’s biggest brands. He’s a business owner and serial entrepreneur; challenging, sometimes even controversial; but always focused on what gets results.

Tagged: Business Strategy , Marketing Strategy

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7 Reasons Why Strategic Plans Fail (and how you can avoid them)

Jessie Published on 28 August 2013

Back to blog

Agile Project Management

Resource Planning

This is part of a blog series with practical tips on how to be more productive, cultivate creativity and growth within your company, and nurture a vibrant culture among your teams.

There’s an old saying that if you fail to plan you plan to fail . This certainly holds true in the project management world, in our daily business endeavors, and in our personal lives.

Consider setting out on a weekend drive to the countryside without first planning your trip: deciding on your ultimate destination, finding a map, checking weather and road conditions, estimating the amount of time it’s going to take to get there and how many stops you’ll likely need or want to take along the way, for instance. Of course, unexpected events such as delays due to road work or other reasons can, and most likely will, require you to deviate from any anticipated plan.

To get to your destination, you’ll need to know what’s in and what’s out for your drive (scope), have some kind of idea of how you’re going to get there (a road map), who is joining you for the trip, who is driving, and most importantly, who’s bringing the snacks (resources), and you’ll need an estimation of time and cost prior to leaving the house. It usually helps if you have some ideas about what will happen if roadblocks or other delays impede your course (contingency plan). 

Why plans fail

The same analogy can be applied to strategic initiatives and project plans. With so many factors, it can certainly be difficult to estimate plans accurately. However, there are plans and there are plans . There are plenty of reasons why bona fide project plans can and do fail. The good news is that these can be addressed preemptively with project management tools that help you reduce the likelihood of a nuclear meltdown.

Here are some reasons why strategic initiatives and plans fail.

1. Unrealistic goals or lack of focus and resources

Strategic plans must be focused and include a manageable, clearly defined number of goals, objectives, and programs. Adequate resources to accomplish those goals and objectives outlined in the plan must be adequately allocated.

According to a study , effective communication methodologies enable project teams and organizations to increase quality, scope, and business benefits success. When planning a project, the scope must be comprehensive, detailed, and crystal clear to team members, stakeholders, and, preferably, to the entire organization to lay the foundation for its success. Implementing a holistic planning process, building a realistic business direction for the future, and employing effective communication channels among teams greatly improves the chances for successful implementation of your overall business strategy.

2. Plans are overly complex

We all know someone who is a plan over-engineering extraordinaire. They write pages and pages of text, mix in complex, overly detailed charts and diagrams, and create a schedule with so many contingencies and restrictions that it becomes virtually impossible to follow — let alone implement — by the project team.

If strategic initiatives aren’t capable of being effectively communicated because of their complexity, then team members cannot be expected to carry them out as intended. 

3. Financial estimates are significantly inaccurate

Cost estimating: art or science? All too often, projects proceed with little more than a general estimation of what sorts of resources are needed (this holds true for estimating required people-power, too). The further along a project is allowed to proceed without adequate financial controls and checks in place, the higher the overall costs involved. This can include more than just bottom line financial costs, but can also extend to customer satisfaction and your perceived reliability as a business and team.

4. Plans are based on insufficient data

Often — and particularly in the software development realm where Agile processes have been implemented — relevant project data is scarce at the initial planning stages. Without a proper tool in place to help teams flexibly modify plans as a project evolves and more information becomes available, this often encourages plans that are too high-level or overly broad (and vague).

If plans are based on wrong assumptions due to insufficient — or misunderstood — data, they drive the project towards disaster from the outset, particularly if there is no Plan B in place and no means with which to easily modify the plan before the project slides out of control.

5. Inflexible/undefined team roles and responsibilities

Often times, project managers and team members are considered primarily delivery (wo)men. They’re handed a project plan, and informed that their performance will be measured based on how well the project delivers against that designated plan. If they question the assumptions, estimates, or the general approach set forth in the plan, they’re instructed to “just get on with it,” as expectations have already been set. Guess who will likely be blamed if plans fails?

While it’s imperative that everyone involved in a project understands from the outset what their work is, how it fits into the project as a whole, and to whom they will be reporting, it’s also important that there be mechanisms by which their feedback is factored into the planning and project processes, particularly as changes in project circumstances require.

6. Staffing requirements are not fully understood

Resource planning is a crucial part of the project planning process, and, if not carefully implemented, incorrect assumptions and estimates made regarding human resource requirements, including the number, role, skill, and timing perspectives can impact project timeframe and overall bottom line costs. After all, plans depend on the resources who deliver them. Data and information is crucial both at the planning stages, and throughout the project process, to monitor availability and project status, and to make any necessary course corrections.

7. Project scope inflexible to changes

Experience tells us that simply because a plan has been implemented and everyone has agreed to it doesn’t mean that all will go as expected. It’s never a good thing when the scope of a project changes and it can usually be avoided through proper planning. But being adaptable and having a “Plan B” in case it does happen along the way is imperative to help attain the overall project goal.

How can you keep your plans from failing?

Considering there are so many reasons why plans can fail, one might wonder why ever plan at all. For one, mapping out a plan before embarking onto its implementation has plenty of benefits. It enables better organization . It allows for a better understanding of objectives and their alignment with broader organizational goals, but it also helps identify and take into account any impediments that exist in reaching those objectives.

Planning helps reduce, and even eliminate, uncertainty, improve efficiency of operations, and find smarter ways to complete project tasks and deliverables. Studies have shown that organizations that have adopted project portfolio management (PPM) solutions , including effective project management tools to help manage projects and the portfolio, and also conduct ongoing reviews of these projects see an increased likelihood of portfolios that meet schedules, scope, quality, budget, time, and business benefits.

Well-defined project planning also provides a basis for monitoring and controlling work on the project, which is crucial to staying on top of schedules, milestones, costs, risks, and issues.

Employing effective software measurement tools therefore becomes essential, not only for early forecasting and estimates, but for measuring compliance and identifying trends and deviations along the way.

• PwC Insights and Trends: Current Portfolio, Programme, and and Project Management Practices (2012)
• The Forrester Wave™: Project/Program Portfolio Management, Q4 2012
• Guerrilla Project Management: Do you make these 7 test planning mistakes?

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7 reasons why some business plans fail.

Salmaan Mian

• August 23, 2021
• Business business plan business plans
• 7 Reasons Why Some Business Pl ...

Often enough, some business plans fail to achieve their objectives. Whether the plan is for securing a loan or investment or hiring new senior staff, there are few reasons why business plans fail.

This blog will examine the 7 main reasons why some business plans fail and what you should avoid doing when writing one.

Introduction

Business plans fail for various reasons. They have to be carefully thought out and well written with minimal mistakes. They should start with a great business idea and contain comprehensive market research and analysis. Sections on the operations, team and financials are also crucial and have to be well presented .

Many common mistakes can make business plans fail to achieve objectives . Business plans fail due to common mistakes range from spelling and grammatical errors to more fundamental issues such as a flawed business idea.

Business plans are different for each company, whether you are looking to create a business plan for a restaurant or a new tech start-up, you should tailor the business plan and avoid these common mistakes.

1)    Bad Business Ideas

One of the primary reasons why business plans fail is due to bad business ideas. Most ideas sound great in theory however sometimes they are simply not viable. Furthermore, some founders do not realise they have invested in a bad idea once it is too late.

To ensure that a business idea is feasible and can be turned into a reality, you should use product validation . Before officially launching the business, founders can do thisby approaching potential target consumers, potentially saving time and money.

2)    Inexperienced Team

Some business plans may present a strong argument for a new business and its need in the market. Instead, some business plans fail to present an appealing team that has the competencies and experience required to execute the business plan and successfully grow a business.

To ensure your business does not fail for this reason, you should create a detailed operations section in which details of the team are included. The section should highlight all the skills, experience, and expertise of the management team so readers also believe in them as well as their vision.

Investors will occasionally reject proposals from start-ups with inexperienced teams. Some investors want to be certain that your team has the relevant qualifications, capacity, and knowledge to manage the business. It is crucial to present an effective, capable, and complete team in a business plan to convince users this will be successful.

3)    Ineffective Executive Summary

The first section of a business plan will usually always be an executive summary. This section is should grab the reader’s attention and convince them to continue reading. However, having a bad executive summary can discourage users from continuing to read the business plan and cause it to fail.

Some users only read the executive summary which emphasises why it is so important to create a high-quality section. If the executive summary is weak, then it will leave a bad first impression for the users and make it difficult to recover from.

To create an effective executive summary , you should write it once the rest of the business plan is complete. This will allow you to summarise the entire document and create a captivating introduction for your users.

4)    Bad Financials

Financial forecasts are a key section of a business plan as they provide details on profitability, potential growth, and long-term vision for the business. The financials are usually the most interesting section of the entire document for investors and creditors. Pro-forma profit and loss statements, break-even, and return-on-investment calculations are all parts of the financials in an effective business plan .

If you fail to prepare a pitch deck and the financials in a business plan, investors are unlikely to take your pitch seriously so it is essential to focus on these sections if you are looking to raise capital.

Preparing financials will require time and research. They should be realistic, backed with research and accurate. It is important to clearly highlight these details as investors will also want to know what you will be spending their capital on.

5)    Spelling and Grammar Mistakes

Correct spelling, grammar, and punctuation are paramount when creating a business plan. Although users of a business plan do not expect business directors to be wordsmiths, they pick up cues about the underlying business and its owners by scrutinising a business plan. When they read a plan with spelling or grammatical errors, it could directly affect their decision.

Proofreading the document multiple times or hiring professional proofreaders will help avoid spelling, grammar, and punctuation mistakes. This will minimise mistakes and by extension, improve the appeal of the business and its directors. Software like Grammarly can also be used to correct spelling and grammar mistakes.

6)    Lack of Market Research

It is important to back your research with facts and statistics, it’s equally important to ensure your facts are true. Business plans should contain everything about your business your market, customer habits, competitors, size, and market share as well as overall market trends.

Often enough, some business plans fail if they do not contain adequate market research and analysis. You should prepare figures, charts, and statistics to support any assumptions or projections made.

Most investors and creditors will check your figures against the industry data for confirmation, so it is crucial they are correct and up to date. Investors will refuse to invest if their data does not match your market research and analysis.

7)    Poor Presentation

Even if your written content is flawless, the presentation has to match up. Presentation mistakes such as uneven margins, missing page numbers, charts and graphs without labels, or a missing table of contents can all put off potential investors or lenders. Rereading the document thoroughly can help correct these simple mistakes.

If in doubt, you should ask someone else to check your plan before presenting it to an investor or creditor. Remember that while you will spend significant time working on your plan, most readers will quickly read the document before they make an initial decision about it. This highlights the importance of having a neat presentation without obvious omissions.

A state-of-the-art pitch deck software, available on Android and iOS , could be used to improve your pitch deck presentation. The use of this software can significantly enhance your presentation when combining a pitch deck and business plan for investors.

What to avoid when creating a business plan

• Having an uninteresting executive summary
• Spelling and grammar mistakes
• Showing a lack of market knowledge
• Unrealistic financial projections
• Poor presentation

If you are worried that perhaps your business plan fails, you should seek professional help. Professional business plan experts can help guide you through the entire process by providing feedback, and presenting your plan in an attractive, professional, and effective structure.

Ultimately, to maximise your chances of successfully achieving your objectives with a business plan, you have to ensure a few key details. Firstly, you need a solid business idea with extensive market research and financial planning . You will also need to avoid making spelling and grammatical errors as well as present the business plan methodically. Although not a guarantee, following these details will significantly improve your chances of success.

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Top 6 Reasons New Businesses Fail

It's often said that more than half of new businesses fail during the first year. According to the U.S. Bureau of Labor Statistics (BLS), this isn't necessarily true. Data from the BLS shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more. These statistics haven't changed much over time, and have been fairly consistent since the 1990s. Though the odds are better than the commonly held belief, there are still many businesses that are closing down every year in the United States.

According to the BLS, entrepreneurs started 843,320 new businesses in the year ending March 2021. From the historical data, we can expect approximately 168,664 of these businesses to fail within the first two years. With the right planning, funding, and flexibility, businesses have a better chance of succeeding. We'll go through some of the biggest mistakes that startups can make and figure out how to improve your chances of success.

Investopedia / Ellen Lindner

1. Not Investigating the Market

So you've always wanted to open a real estate agency, and you finally have the means to do so, but your desire to open the agency blinds you to the fact that the economy is in a down housing market and the area where you want to work in is already saturated with agencies, making it very difficult to break in. This is a mistake that will result in failure from the start. You have to find an opening or unmet need within a market and then fill it rather than try and push your product or service in. It's a lot easier to satisfy a need rather than create one and convince people that they should spend money on it.

2. Business Plan Problems

A solid and realistic business plan is the basis of a successful business. In the plan, you will outline achievable goals for your business, how your business can meet those goals, and possible problems and solutions. The plan will figure out if there's a need for the business through research and surveys; it will figure out the costs and inputs needed for the business, and it will outline strategies and timelines that should be implemented and met.

Once you have the plan, you should follow it. If you start doubling your spending or changing your strategies whimsically, you are asking for failure. Unless you have found that your business plan is overwhelmingly inaccurate, stick with it. If it is inaccurate, it's best to find out what's wrong with it, fix it, and follow the new plan rather than change how you do business based on quick observations.

The more mistakes you make, the more expensive your business will become and the greater the chance of failure. You may also be called to pivot when market conditions change drastically and impact negatively the chances of success based on the initial business plan. In this case, you revisit your plan and edit it fully based on the decided pivot.

3. Too Little Financing

If you have started a company and things aren't working out, and you have little capital and a struggling business, you're not in a good position to ask for another loan . If you're realistic at the beginning, you can plan to start with enough money that will last you to the point where your business is up and running and cash is actually flowing in.

Trying to stretch your finances at the beginning may mean that your business never gets off the ground, and you'll still have a lot of cash to repay. Lean management strategy is warranted in this phase in particular but can be applied even after this phase. Try to think of multi-channels for funding and financing. Get educated about this area and be creative searching alternative sources of financing.

4. Bad Location, Internet Presence, and Marketing

A bad location is self-explanatory if your business relies on location for foot traffic . Just as dangerous, however, is a poor Internet presence. These days, your location on the internet and your social media strength can be just as important as your company's physical location in a shopping district. An online presence will let people know that they can give you their business, so if the need is already there, the availability and visibility of your business is the next important step.

This is similar to marketing . Not only must you make sure that marketing reaches people, but it must also reach the right people. So make sure the type of marketing lines up with the audience you want to reach. Big billboards may not be the way to go for an internet company, just as online ads may not be the way to go for a heavy-construction business. If the need is already established, make sure you're reaching the audience who needs your product or service.

5. Remaining Rigid

Once you've done the planning, established your business, and gained a customer base, don't become complacent. The need that you're fulfilling may not always be there. Monitor the market and know when you may need to alter your business plan. Being on top of key trends will allow you lots of time to adjust your strategy so that you can remain successful. One must only look at the music industry or Blockbuster video to know that successful industries can undergo huge changes.

6. Expanding Too Fast

Now that your business is established and successful, it's time to expand, but you must treat the expansion like you're starting all over again. If you're expanding the reach of your business, make sure that you understand the areas and markets into which you'll now be reaching. If you're expanding the scope and focus of your business, make sure you understand your new products, service and intended consumer as much as you do with your current successful business.

When a business expands too fast and doesn't take the same care with research, strategy, and planning, the financial drain of the failing business(es) can sink the whole enterprise.

Though the rate of business failure in the first two years is around 20%, it doesn't mean that you have to fail. Through research, planning, and flexibility, you can avoid many of the pitfalls of a new business and be a part of the 25% that make it to 15 years and beyond.

U.S. Bureau of Labor Statistics. " Table 7. Survival of Private Sector Establishments by Opening Year ."

U.S. Bureau of Labor Statistics. " Table 5. Number of Private Sector Establishments by Age ."

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Resources for Your Growing Business

20 reasons why small businesses fail and how to avoid them.

The failure rate of small businesses is significant—as many as 45% of start-ups don’t survive the first 5 years [1]. So why do so many businesses fail? The primary causes of business failure are cash flow problems, poor financial planning, and a lack of market awareness.

We’ll explore 20 reasons why small businesses fail so you can avoid common pitfalls and develop a strategy to help your business grow and thrive.

Key Takeaways 

• Most small businesses fail within the first 10 years.
• Common financial reasons include poor pricing strategies, insufficient funds, and cash flow.
• Creating a clear business plan can help small business owners avoid common failures.
• Understanding your target market is key to creating a good business strategy.

Table of Contents

• Lack of Planning
• Choice of Location
• Lack of Research
• No Business Plan
• Poor Pricing Strategy
• Insufficient Funds
• Cash Flow Problems
• Poor Debt Management
• Dependence on One Customer
• Inadequate Profit
• Competition
• Lack of Market Demand
• Unexpected Growth
• Lack of Experience
• Ignoring Customer Needs
• Poor Management
• Ineffective Marketing
• Lack of Innovation
• Forgetting the Customer
• Ineffective Leadership
• Frequently Asked Questions

1. Lack of Planning

A clear vision is key to successfully running your small business. Start by setting research-backed goals for your company: what benchmarks do you want to reach in your 1st year? In your 5th year?

Setting timelines helps you keep on track with your goals and helps you make adjustments if you find you’re not where you want to be. Create a strategy for your business growth and set up check-in points. 

For example, check in every 2 months to make sure you’re on track to reach your goals. This gives you a chance to follow up with what’s working well and change anything that needs to be modified to help you stay on track.

2. Choice of Location

Business location is one of the most important decisions you can make when setting up a new small business. If you provide in-person goods or services, you need to make sure that there’s enough local demand to support your business. 

Businesses like bakeries and shops often rely on foot traffic for success, so visibility is key. Other industries like lawn care require you to commute to your customers, so you’ll want to pick a central location to minimize transportation costs.

If you offer remote services, location is still important—if you have some flexibility, consider how business taxes vary between states and municipalities. 

It’s also important to consider how you might expand in the future. If you see yourself opening up a second location, look for an area that has room to accommodate your future business growth. 

3. Lack of Research

Understanding your industry, competitors, and target market is key to business success and survival. Research common pitfalls in your industry so you can understand the specific challenges your company might face.

It’s also important to learn about your competitors. See how your services and prices compare to theirs, and consider whether you can offer any niche contributions to set your business apart.

Learn what customers are looking for from your company so you can deliver tailored experiences. Some demands are evergreen (constant), while others vary with market trends—research can help you determine and predict market trends so you can stay on top of your customers’ needs.

4. No Business Plan

In addition to your overall vision for your company, you’ll need to create a clear and actionable business plan. This helps communicate your vision to investors and other team members. There are many resources available to help you create a business plan, including business plan templates .

Your business plan should include:

• A description of your company and what you offer
• A market analysis including threats and opportunities
• Competitor analysis
• Marketing plan, including target customer profile
• Budget and projected cash flow
• Scalable growth plan

You’ll want to regularly revisit this business plan and review the success of each strategy. If you find anything that’s not serving your business, catching that early and making the right adjustments can be the difference between failure and success.

5. Poor Pricing Strategy

Setting the right price is a delicate challenge, but it’s essential for surviving as a small business. You need to price high enough that you cover your costs and make a profit, but low enough that it’s still accessible to a large customer base.

Start by understanding the costs involved in delivering your product or service. Calculate all the materials and labor costs, then factor in your profit margin .

Next, compare your prices against competitors. When you first start out, you may not be able to match the prices and profits of more established companies. If you find your prices are significantly higher, you might need to decrease your profit margin slightly. 

Remember that even if you can’t exactly match your competitors, there are other strategies you can use to distinguish your business—competitor prices are a guideline, not a hard rule.

6. Insufficient Funds

Financing is a common challenge for new businesses, and it’s important to ensure you have sufficient funds right from the start. There are a range of financing options you can consider, from small business loans to investor support. Research all your options and compare how they’ll support you in the short and long term.

It’s also important to effectively manage your finances once you’ve acquired start-up capital . Make sure you understand all of your business costs including licenses, materials, taxes, and labor. Balance that against your projected profits to make sure you’ll be able to stay operative through the first few challenging years.

7. Cash Flow Problems

Financial management isn’t just about the big picture—it’s also about the way your business spends cash in day-to-day business operations. Make sure you keep track of all the ways your company spends money, from larger costs like rent and labor to everyday transportation costs.

It’s easy to get caught up in things like marketing and product development and run out of cash flow early on. Make sure you have a clear budget that you review regularly to ensure you have sufficient cash flow to manage your business.

8. Poor Debt Management

There’s more to small business financing than just start-up capital and cash flow: you’ll also want to stay on top of any debt and ensure your credit remains strong. If not managed carefully, these challenges can easily spiral out of control and sink a small business.

It’s not uncommon for new entrepreneurs to assume some debt as a new business—you might have taken a start-up loan as part of your initial process. However, that debt can become problematic if you’re not making enough profit to consistently make your payments.

One of the most common signs of impending debt issues for small businesses is delaying bill payments. If you find that your business is struggling to meet bills, debt , or credit card payments, it’s time to do a close examination of your finances and cash flow to see where you might be able to cut costs and get on top of any financing issues before they become a larger problem.

9. Dependence on One Customer

Building customer relationships is important, but it can be risky to become too reliant on just one customer. Even if that customer represents a large share of your current profit, there’s never a guarantee that they’ll be able to sustain your company.

Once you’ve found a great customer, analyze how you won that customer and see how you can apply those strategies to finding new customers. Consider what that client was looking for and how they found your company so you can understand what worked well in your next marketing campaigns .

Build a customer profile and focus your marketing on reaching clients who fit that profile. See if they tend to live in a certain area, frequent a certain job or social media platform, or search for particular keywords. Try to diversify your customer base so you aren’t reliant on just one client for your business survival. 

10. Inadequate Profit

Most small businesses have low profits in their first few years, but there’s a point where those profits can become too low to survive. If you find that your profits aren’t enough to cover your expenses , it’s time to think about profit maximization strategies.

One of the first things to examine when you’re facing inadequate profit is your current cost management. Are there any areas where costs can be cut? Consider whether there are more affordable manufacturers, equipment options, or business spaces available to you.

You can also examine your pricing strategies. If you start by pricing low and you’re selling a large volume but still not making a good profit, your prices may be priced too low. Calculate how much you would have to raise your prices to make enough profit, and test out slightly higher prices to see how customers respond.

11. Competition

Even if you offer great products and services, it can still be hard to survive if you’re facing a lot of competition. Conduct a market analysis to see how many competitors are in your industry and area, what products they offer, and how their prices compare to yours.

Once you have a thorough understanding of your competitors, you can devise strategies to set yourself apart. This can include everything from offering competitive prices to providing a higher-quality product. You can also explore marketing strategies or consider how you can offer a slightly different product to fill a market niche.

12. Lack of Market Demand

Even the best businesses can fail if there’s no demand for their product. Market demand also fluctuates, so what’s in demand today can change by tomorrow. Keeping track of market trends and demand can help you stay ahead of the curve with what your company offers.

Start by assessing what’s currently in demand and how you can pitch your product to meet that demand. As customer needs evolve, you may need to slightly alter your products to adapt to changing customer needs.

13. Unexpected Growth

Growing your business is a hallmark of success, but it can also pose risks if you expand too rapidly without a clear plan. Unexpected growth can lead to over-extending your resources, overworking employees, and losing track of customers.

To prevent fallout from unexpected growth, it’s essential to have a scalable business plan. Make sure you can still deliver high-quality goods and services as you expand, so your customers stay satisfied. Keep track of how much money and labor you’re expending on new services so you can bring on new employees as you grow.

It’s all about striking a balance—you want to make sure you hire enough talent to keep up with growth but avoid hiring too early in case your growth slows down. Tracking your expenditures in relation to growth is the best way to create a plan for the future.

14. Lack of Experience

Successful business owners need vision and passion, but they also need experience to translate into their goals into a successful company. Lack of experience and industry knowledge can hold your business back, so it’s important to build a dedicated management team with a thorough understanding of the market.

A business mentor can help you manage the small business owner aspects of your company. Look for someone with experience managing their own business who can advise you on things like developing a business plan , hiring the right talent, and pitching to investors. 

It’s also important to bring on experts in your industry. Look for experienced financial advisors who can guide you through developing your financial strategies. You’ll build experience as you grow, but it’s a good idea to bring in experts for specific jobs like marketing and accounting.

15. Ignoring Customer Needs

The best source for understanding market demand is customers themselves. Responding to feedback helps you build strong relationships with your existing customers and helps you understand what you need to do to gain more customers.

Listen to customer feedback on pricing, services, accessibility, and any other concerns they may have. In some cases, you may not be able to accommodate every suggestion, but it’s helpful to respond and then do a cost-benefit analysis and see how making the recommended changes might impact your business.

If you feel like you’re not receiving customer feedback, consider reaching out. Comment and feedback forms after a completed order can be a helpful tool for gaining market analysis in real-time.

16. Poor Communication

Having a clear vision that you can communicate to investors and customers is important, but it’s just as key to having strong communication inside your business. When your team doesn’t understand your business goals, it’s harder for everyone to collaborate efficiently. 

If you’re operating your small business as a partnership, it’s fine to have different skill sets, but you need to be on the same page about vision and goals. Creating a business plan collaboratively can help ensure you agree on the primary strategies for your company.

Weak communication can lower morale and productivity and prevent your business from growing effectively. Consider making a modified version of your business plan that you can share with your employees. This can include an overview of your business goals and strategies to help everyone get on the same page.

17. Ineffective Marketing

Even with great products, your business can’t succeed unless you effectively reach your target market. Ineffective marketing strategies can hold you back from connecting with customers, while great marketing helps you reach new audiences and grow your business.

It’s important to have a targeted campaign with a clear focus. Start by identifying your target customers and learning about how they interact with local businesses. This helps you determine where to place ads, what to offer, and how to speak to potential customers.

Make sure your marketing strategy has a way to track results. That could include tracking impacts and clicks, measuring follow-through, and consulting with new customers to discover how they found your business so you can build on your most effective strategies.

18. Lack of Innovation

A great product at the start of your business may not remain competitive as the market changes. Innovation is essential for ensuring your business stays relevant and continues to be successful. 

This doesn’t mean you have to drop products if they’re still performing well, but it’s a good idea to consider how you can improve or develop new products if you have the capital to spend on development. This helps you stay ahead of the curve in a changing market.

Even with evergreen products, your business practices can still become stagnant. You’ll need to find new marketing strategies to reach new customers so that you can have a continuous revenue stream. Innovation spans all components of your business, from product development to new marketing methods.

19. Forgetting the Customer

Even if a product seems great to you, remember that in the end, it’s about the customer and how the product will meet their needs. Focus on learning about what the customer is looking for—what’s missing from current products, and how can your business satisfy that need.

If customers offer feedback, try to learn from that and incorporate it where possible. This can involve product innovation or customer service relationships. Customers will remember a great product, but they’ll also remember a personable and helpful business interaction.

Check-in with customers to make sure they’re fully satisfied with their experience. One way to do this is to send a follow-up email or form after their purchase. You can incentivize feedback by offering a small discount for filling out the form—this also encourages customers to return to your business.

20. Ineffective Leadership

While a great team and expert advice are important in supporting your business, it’s ultimately up to you to lead your company forward. If you’re burnt out or losing track of your vision, your team won’t know where to follow.

Strong leadership helps cultivate a positive company culture, a motivated team, and great client relationships. Your employees take their cue from you, so make sure to set a strong model for interacting with customers. 

Creating a good company culture starts with forging strong employer-employee relationships. Get to know your employees, their goals, and their challenges at work so you can help them perform their best. When you create a work environment that’s supportive and growth-oriented, it encourages your team to deliver their best work and help build your business.

The reasons why small businesses fail can include everything from poor pricing strategies to ineffective marketing. Learning how to recognize problems like poor management and inexperience can help you identify issues in your company before they impact your success.

Understanding and recognizing why small businesses fail can help you create strategies to avoid common pitfalls. Tools like FreshBooks accounting software can also help you manage your expenses and avoid problems like insufficient cash flow. Try FreshBooks free to discover an easy tool to help your small business thrive.

FAQs on Reasons Why Small Businesses Fail

Is it true that 90% of startups fail.

Yes, ultimately about 90% of startups fail. A few fail in the first year, and most new businesses fail in the first 2 to 5 years. After 5 years, businesses that survive tend to see a small rise in profits and growth.

Why are small businesses declining?

Some of the biggest reasons why small businesses decline are market competition, lack of demand, and lack of financing. In many cases, larger and more established companies make it difficult for new small businesses to enter the market.

What is the biggest problem facing small businesses today?

One of the biggest problems currently facing small businesses is inflation. High inflation rates mean higher input costs for products, and usually also mean employees will seek higher salaries. It can also mean higher interest rates when trying to secure a first business loan.

Why are small businesses failing in today’s economy?

Many small businesses are failing in today’s economy because they lack planning and financial preparation. While market competition and funding pose challenges to business owners, these can be overcome with financial preparedness and a clear business plan.

Sandra Habiger, CPA

About the author

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

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Home » The Tony Robbins Blog » Career & Business » 14 reasons why businesses fail

14 reasons why businesses fail

Learn more about business failure – and how to avoid it.

WHY BUSINESSES FAIL

So why do businesses fail ? What makes one entrepreneur succeed while another experiences business failure ? It comes down to a combination of preparation, strategies and knowledge. 

1. Not having an effective business plan

If you don’t have an effective business plan, you can’t properly communicate your vision to your team. Tony Robbins advocates not just having a business plan, but having a business map for entrepreneurs to take their small businesses to the next level. Your business map will help you master vital stages of the business cycle, like scaling. Explosive growth can be tempting, but not scaling in a mindful manner is one of the biggest reasons why businesses fail – you have to strike the right balance between growth and infrastructure.

2. Not putting the customer first

One of the top reasons why businesses fail is that they fall in love with their product instead of their customer. To circumvent business failure , fall in love with your client and figure out every single way you can meet their needs. Anticipate what they want, what they need and, when possible, determine what they might not even know they need yet. Turn your customer into a raving fan – somebody who will tell everybody about your product or service or company. Once you grasp that your customer’s life is your business’ life , you can truly envision how to succeed.

3. Not hiring the right people

Hiring the right people has a massive effect on nearly every area of your business. One of the most obvious examples is sales: If you don’t have enough sales, you can’t pay your team or yourself and you cannot grow. Confident salespeople are a key to increased sales. It’s also astounding how many businesses fail due to inventory mismanagement. Hiring someone who is skilled at inventory management or using a good inventory management software is an easy way to solve this issue.

4. Doing it all yourself

Yes, you are an entrepreneur, but that doesn’t mean you have to do everything on your own. A business is only as strong as the psychology of its leader – and the ability to let go and trust others is an essential leadership trait . If you need to control everything, it’s likely you won’t succeed over the long term. Delegating is a top skill to manage a business effectively : it helps you manage your time, focus your energy on what matters most and spot potential up-and-coming leaders within your company.

5. Lack of flexibility

Remember Blockbuster? Radio Shack? Tower Records? These giants of their industries all fell victim to the same reason for business failure : inability to adapt to a changing market . Entrepreneurs who fall in love with a service or product and refuse to change directions when the market demands it are likely to fail. The key to long-term success – in business and in life – is flexibility and a willingness to pivot when necessary.

6. Lack of innovation

Peter Drucker and Jay Abraham, among the greatest business minds of our time, maintain that business failure – and success ­– all starts with two key factors: innovation and marketing . Innovation means finding a better way to meet your clients’ needs than anybody else. Anybody can make some money for some amount of time. But if you want to become successful and sustain that success over years and over decades – if you want to build a brand – then you have to find a way to add more value than anybody else in the game. And that comes from constantly innovating.

7. Not understanding your industry

This is one of the driving factors behind why businesses fail to innovate. Certain industries require more innovation, while others may have different product life cycles. Consider the technology industry. The life cycle on an average product is about six months. And in some sectors, like the app business, it’s just one month. People expect continual innovation and improvement , and if you don’t deliver that to them, someone else will. It’s a different world we live in today, where the only constant is change. And if you aren’t staying ahead, you’re falling behind.

8. Fear of business failure

Business failure is one of the main , if not the biggest, fears of any business owner. If it weren’t for that fear, we wouldn’t even be asking, “ Why do businesses fail ?” However, as you develop your entrepreneurial and managerial skills, you will find that one of your greatest assets in running a successful business is overcoming your fear of business failure . Without minimizing the validity of your fears, you need to learn to view business failure as a learning opportunity rather than an insurmountable obstacle. Remember, life happens for you, not to you .

9. The wrong mindset

One of Tony Robbins’ central philosophies is that our mindsets create our realities ; what we believe influences what we are able to achieve. As entrepreneurs, when we embrace strategies for turning business failure into success, we transform our mindset from one of defeat into one of empowerment . And when we are empowered, a failing business is not the concluding chapter in our story; it is only the beginning. Don’t let your limiting beliefs disempower you. Instead, stay hungry in your search for success . Your hunger will inspire you and pay off in the end.

10. Lack of vision

Marketing guru Jay Abraham understands the question of why businesses fail. It’s a high-velocity and high-leverage mindset that prepares business owners to navigate the ever-changing seas of business. Rather than adapt your dreams to the economy, you must set and achieve your own goals, independent of circumstances. How can you accomplish this? By recognizing that business success hinges on loyalty to a vision .

11. Lack of passion

A passion-driven mindset lets you persist in honing your ethics and beliefs while learning from all the reasons why businesses fail . By adhering to your passions, you’re able to see your circumstances clearly – the positives and negatives. With this level of focus, you create an unstoppable drive to accomplish your goals. This focus allows you to take risks, acknowledging that feelings of doom and failure arise not from circumstances but from feeling stuck in the status quo. Don’t get stuck – persist.

12. Ineffective marketing strategies

Whether your company is large or small, marketing is the next critical step . Why do businesses fail in their operations? If you cannot find a way to market your product or service, then your business will have a hard time getting off the ground. Because the truth is, you could have the most innovative product or service, but the best product doesn’t always win. Do you think McDonald’s has the best burger? Probably not. But their marketing strategies are top-notch.

13. Not understanding your X factor

To market effectively and prevent business failure , you have to understand what your “X-factor” is . What are you here to deliver and how can you improve your customers’ lives? Take, for example, FedEx founder Fred Smith. Even in FedEx’s early stages when profits were slim, Smith invested in three market studies for testing the value expedited shipping would add to his product. Smith’s research paid off: He discovered his X factor and FedEx is now a household name, in large part due to its corner on the market via expedited shipping.

14. Asking the wrong questions

To help discover what your true value is as a business, go one step further and ask yourself the right questions . This includes core questions like: What does the marketplace need? Who is my customer? What can I do to make my company talkably different ? And perhaps one of the most important questions you can ask yourself is, “What business am I really in?” Let’s look at an example of a wildly successful company that needed to ask itself that very question: Apple.

How Apple came back from business failure

Today, everyone has heard of Apple. It’s one of the most valuable companies of our time, with a market cap of nearly $2 trillion and a stock that is soaring above its competitors. But it wasn’t always that way. Apple is actually the perfect example to look at when considering why businesses fail .

Apple’s founder Steve Jobs was fired from the company in 1985. Before re-hiring Jobs in 1997, the failing business operated at a loss and inched toward bankruptcy. In fact, Michael Dell was advising decision-makers to shut Apple down and give its shareholders their money back. But Apple persisted, and Steve Jobs asked himself one of the most critical questions in his lifetime: “What business are we really in?”

At first, the answer seemed obvious – Apple was in the computer business. But how were they supposed to win back customers when 97% of all computers across the United States were run by Microsoft?

That’s when they realized that no matter how good their product was, Microsoft was embedded and entrenched in the masses. After all, it was one of the main reasons Apple found itself in bankruptcy.

So Jobs asked, “What business do we need to be in?” And Apple decided that it needed to be in the business of connecting people to their passions – to their photographs, their music, to each other. When he did this, he avoided one of the top reasons why businesses fail : lack of flexibility.

Answering this question created one of the most life-altering shifts for Apple. The company transitioned into building basic, cool technology that connects people to what they love. Upon rehiring Jobs, the company arranged a partnership with Microsoft which signaled the company’s turnaround. When Apple launched the iMac just one year later, the firm returned to profitability and made its mark. Before long came the iPod and iTunes, then the iPhone. Their net sales soared. S ince that point Apple has never stopped innovating, and their marketing campaigns have propelled the company to an entirely new realm. Had Jobs viewed his firing as the death toll of his career (and company), the firm would have never experienced its revival.

Today, is Apple really in the computer business? Only 10.4 % of their business is computers, which means almost 90%  is not – the vast majority is made up of iPhone , iPad and Apple Watch sales. Honestly answering the question “ Why do businesses fail?” was vital for Apple to change course and become profitable.

If success is about innovation and marketing, then you have to decide who your customer is, what they need, what business you are in and what business you really need to be in. Answering these questions can change your entire business, because the answers will ultimately allow you to change your offer. As we say, change your offer, change your business – and change your business, change your life.

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Why Some Companies Grow Amid Uncertainty — and Others Don’t

• Simon Freakley
• David Garfield

A survey of 3,000 global executives suggests that it’s not strategic thinking that sets them apart. It’s their inclination to move quickly.

When you cannot base strategy on reasonably certain premises — or when those reasonable premises are undone by unforeseeable events — what is a company to do? You still have to make plans, allocate capital, and invest for the future. Some argue that agility is the key to thriving in disruptive times, but if all you do is pivot, you are just going around in circles. The annual AlixPartners Disruption Index surveys 3,000 global executives about what is knocking them sideways. Among other things, it shows that three out of five say that it is increasingly challenging to know which disruptive forces to prioritize. Amid all this, there is a group of companies doing very well: about one in five said their companies lead their industry in revenue growth. In this article, the authors dig into that 2024 data to find out what sets these companies apart, and what other companies can learn from them about setting growth strategy in an uncertain world.

Strategic planning plays a key role in helping companies anticipate and manage business cycles. But forces like emerging digital technologies, climate change, and deglobalization — not to mention “black swan” events like the Covid-19 pandemic and wars — have turned a rolling sea into a choppy one, where companies are beset by currents, crosscurrents, riptides, and squalls. This multiplicity of related, unrelated, and inter-related difficulties have one thing in common: They are unpredictable.

• SF Simon Freakley is the Chief Executive Officer of AlixPartners, a post he has held since 2015. He is based in New York.
• David Garfield is a Chicago-based partner and managing director of AlixPartners, and the global leader for the firm’s industry practices.

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50 Reasons Why Some Businesses Fail While Others Succeed

Why is it that so many businesses fail while so few succeed.

One of the great mysteries of entrepreneurship is why businesses fail . Some people start one successful business after another while others fail to succeed.

Why some businesses fail while others succeed?

No one starts a business expecting to fail. Starting a business can be a lot of fun and excitement. Success requires a lot of planning and starting the business the right way. Entrepreneurship is easier if you start your business the right way.

The worst part about a failing business is that the entrepreneur is unaware of it happening until it is often too late. It makes sense because if the entrepreneur really knew what he was doing wrong, he might have been able to save the business. Some entrepreneurs live in a land of denial while others are unaware of their mistakes.

One thing for sure, a business almost always fails because of the entrepreneur.

“ It’s not the plan that is important, it’s the planning. ” Dr. Graeme Edwards

There are over 28 million small businesses in the United States, according to the SBA .

It’s an impressive number. The sad reality is that only about 50% of them survive. What’s worse is that only about one-third survive 10 years or more. The life of an entrepreneur is unforgiving. It is a constant challenge. There are many moving parts. Any one of them could put you out of business.

Factors That Lead to Business Failure

Businesses fail for many reasons. The following list includes some of the most common reasons:

1 – Lack of planning  – Businesses fail because of the lack of short-term and long-term planning. Your plan should include where your business will be in the next few months to the next few years. Include measurable goals and results. The  right plan will include specific to-do lists  with dates and deadlines. Failure to plan will damage your business.

2 – Leadership failure – Businesses fail because of poor leadership. The leadership must be able to make the right decisions most of the time. From financial management to employee management, leadership failures will trickle down to every aspect of your business. The most successful entrepreneurs learn, study, and reach out to mentors to improve their leadership skills.

3 – No differentiation – It is not enough to have a great product. You also have to develop a unique value proposition, without you will get lost among the competition. What sets your business apart from the competition? What makes your business unique? It is important that you understand what your competitors do better than you. If fail to differentiate, you will fail to build a brand.

Why do small businesses fail? Statistically, small businesses that are most likely to fail are local trucking, plumbing and HVAC service providers, grocery stores, and security brokers.

4 – Ignoring customer needs – Every business will tell you that the customer is #1, but only a small percentage acts that way. Businesses that fail lose touch with their customers. Keep an eye on the trending values of your customers. Find out if they still love your products. Do they want new features? What are they saying? Are you listening? I once talked to the CEO of a training company who told me that they don’t respond to negative reviews because they are unimportant. What? Are you kidding me?

5 – Inability to  learn from failure  – We all know that failure is usually bad, yet it is rare that businesses learn from failure. Realistically, businesses that fail, fail for multiple reasons. Often entrepreneurs are oblivious about their mistakes. Learning from failures is difficult.

6 – Poor management – Examples of poor management are an inability to listen, micro-managing – AKA lack of trust, working without standard or systems, poor communication, and lack of feedback.

7 – Lack of capital – It can lead to the inability to attract investors. Lack of capital is an alarming sign. It shows that a business might not be able to pay its bills, loan, and other financial commitments. Lack of capital makes it difficult to grow the business and it may jeopardize day-to-day operations.

8 – Premature scaling – Scaling is a good thing if it is done at the right time.  To put it simply, if you scale your business prematurely, you will destroy it. For example, you could be hiring too many people too quickly, or spend too much on marketing. Don’t scale your business unless you are ready.  Pets .com failed because it tried to grow too fast. They opened nationwide warehouses too soon, and it broke them. Even the great brand equity that they have built couldn’t save them. Within a few months, their stock went from $11 to $0.19.

According to a study of about 3200 high growth internet startups done by  Startup Genome , about 70% of the startups in their dataset scaled prematurely.

9 – Poor location – Poor location is a disadvantage that might be too much to overcome. If your business relies on foot traffic, location is a strategic necessity. A poor location might make your customer acquisition costs too high.[/fusion_text]

10 – Lack of profit – Revenue is not the same as profit. As an entrepreneur, you must keep your eyes on profitability at all times. Profit allows for growth. According to Small Business Trends, only 40% of small businesses are profitable, 30% break even, and 30% are losing money.

11 – Inadequate inventory management – Too little inventory will hurt your sales. Too much inventory will hurt your profitability.

12 – Poor financial management – Use a professional accounting software like Freshbooks. Keep records of all financial records and always make decisions based on the information you get from real data. Know where you stand all the time. If numbers are not your thing, hire a financial professional to explain and train you to understand, at least the basics.

13 – Lack of focus – Without  focus, your business  will lose it the competitive edge. It is impossible to have a broad strategy on a startup budget. What makes startups succeed is their ability to quickly pivot, and the lack of focus leads to the inability to make the necessary adjustments.

14 – Personal use of business funds – Your business is not your personal bank account.

15 – Overexpansion – It is easy to make the mistake of expanding your business into too many verticals. Before you enter new markets make sure you maximize your existing market.

16 – Macroeconomic factors – Entrepreneurs can’t control macroeconomic factors. Common macroeconomic factors are business cycles, recessions, wars, natural disasters, government debt, inflation, and business cycles. Your business can still succeed in bad times. Hyatt, Burger King, FedEx, Microsoft, CNN, MTV, Trader Joe’s, GE, HP are only a few examples of wildly successful companies started during a tough economy.

Sometimes businesses fail due to a once in a lifetime economic turmoil caused by an unforeseen external challenge. The COVID-19 pandemic has forced many businesses to fail. Unfortunately, the destructive impact of the COVID-19 crisis is especially damaging to small businesses.

17 – No succession plan – Future leaders should be identified in advance. Without an effective business succession plan , your business is unprepared to fill openings in created by retirements, unexpected departures, or death.

18 – Wrong partner – It’s no secret that it is easier to succeed in business with the right partners. The wrong business partner will, at the very least hurt, or, at worst, destroy your company.

If you are serious about making it as entrepreneurs, focus on the following:

19 – Make a plan – It all begins with planning. The biggest mistake many entrepreneurs make as they start their ventures is that they don’t sit down and write a business plan. The goal is to keep it concise. Don’t treat it like a business school project. Leave writing a 50,000-word business plan to academics. Let them waste their time. You can do a great business plan in one or two pages. There are some great books on business plans such as “The Secrets to Writing a Successful Business Plan” and “Successful Business Plan“.

Your business plan should include the following:

20 – Core values – Your core values are the  fundamental beliefs that drive your business . They are your guiding principles that should remain constant. Even as your company grows your core values should remain the same. Core values can also serve as a moral compass. Some of the more common core values are integrity, trust, excellence, respect, responsibility, and teamwork.

Don’t allow your core values to become empty words, make them part of your culture.

21 – Mission statement – A brief statement that defines  why your company exists . Your corporate reason for being. It describes your target market and the services/products you offer. If you have done it right, your mission statement, in just a few sentences, will communicate the essence of your business to your business and to the world.

22 – Who are your customers – If you are  going to succeed in business  you will have a clear definition of your customer. It is not an abstract idea. It is something that can be expressed in numbers. For example, if your target customers are family law attorneys, you have to be able to put a number on it. For example, there are 175,000 (fictional number) family law attorneys in the USA and they are our customers.

23 – What is your product/service – It’s key to have a clear definition of the services you offer. Without a clear definition, you will be unable to effectively develop, market, and sell your services.

24 – Involve your customers in product development –  Most businesses that fail create products/services without involving their customers. If you are serious about success, you will build your products with your customers. Businesses that fail build products based on assumptions.

25 – How will you sell and market your product/service – Marketing and selling your service could be one of your  biggest business challenges . A sales and marketing plan is a must.  Set measurable goals . Create systems to manage the process.

Proper preparation doesn’t require a 100-page formal business plan. The keyword is “proper,” not “planning.” If you do everything in your power to properly plan your business, you increase your chances for success. Don’t confuse planning with avoiding action or paralysis analysis. No amount of planning is a substitute for action.

“No matter what one does, regardless of failure or success, the experience is a form of success in itself.” Jack Ma, billionaire founder of Alibaba

Your first action item is to write your business plan. Completing your business plan will give you an opportunity to process your idea in detail. One of the best things you can do is to collect your thoughts before you make a real commitment to starting your business. If you aren’t passionate about writing your business plan, it’s unlikely that you’ll get passionate about your business either.

One day you might think of a product that could revolutionize life on earth as we know it. You might dream up something so great that no one ever thought of before. The reality is that most  successful businesses  are without revolutionary ideas. Instead, they modify or improve well-established products or services.

Must Have Business Plan Components

• Mission Statement
• Company Description
• Product Description
• Market Analysis
• Marketing Strategy
• Revenue Projections

If you don’t prepare a business plan, your initial enthusiasm will fade and you will fail.

26 – In the end, enthusiasm is not enough to succeed. It takes much more than that. You need to research your market, your competition, the financial feasibility of your concept, and more. As you fight through the battles of making your dream come true, you need to be able to go back to read and re-read your business plan. The concepts laid down in your business plan will help you to convince your bank to give you the loan you need, or to determine the best marketing strategy for your business. Don’t be emotional when you prepare your business plan. Treat it as a business process with goals and deliverables. Once you complete it, ask yourself, “Would I invest in this company?” Remember, you are going to have to convince others to support your idea. Bankers, corporate buyers, investors, partners, and the like will look at your business based on facts. Their decision is not going to be based on emotion. When creating a written business plan you give yourself a chance to think about your idea thoroughly. As you put your ideas in writing, you tend to give them more thought. You might think writing a business plan is boring, or a waste of time. Truly, it should be one of the most exciting projects you could ask for. You are writing your future.

27 – You are accountable –  Many businesses fail because people treat them like hobbies. From day one treat your business as a business. Treat yourself as an employee. Set measurable goals and hold yourself accountable. If you only plan to work in your business a couple of hours a week, you can’t expect great results. Owning your own business requires focus and commitment. Educate yourself about the wide range of options and technologies. You can’t expect to get an ounce more out of your business than what you’ve put into it. If you are only willing to put in a few hours a week, expect to get a few hours a week of income. There are no shortcuts.

Entrepreneurs can stay accountable several ways:

28 – Write down your goals. Keep your goals in front of you and keep coming back to them, at least once a month.

29 – Build an advisory board.

30 – Join a peer advisory group. You will get feedback from fellow entrepreneurs. The best kind of peer advisory group is where your business is the smallest business. You definitely don’t want to be the largest or most successful business of your group. When you are the smallest you will be pushed harder to catch up to the others in your group.

31 – Find a coach. Try to work with a coach who has already built a successful business.

32 – Find an investor, an angel or venture capitalist .

33 – Forget the idea, take action –  You should never start a business based on a great idea. An idea is just that: an idea. It’s worthless. It is not going to help you succeed in business. Ideas won’t do; you need action to succeed. Wantrepreneurs are full of ideas that never result in action. Entrepreneurs are action takers.

Here are some effective ways to turn your idea into action:

34 – Believe that you can do it. I don’t mean fooling yourself into anything, but the only way can you make it happen if you believe that it will happen.

35 – Reach out to mentors. There are many successful people within your own existing network, and you can also make new connections. Connecting with mentors helps you hear what it takes to be an entrepreneur.

36 – Minimize risk, but understand that it is unavoidable.

37 – Give it due time. Ideas are fast, but making them happen will take time. Even if all goes well, almost everything you do in business will take longer than expected.

38 – Get others to believe in you. Successful entrepreneurs are great at selling their visions. You might have to convince vendors, partners, landlords, investors, employees, or a list of more people.

39 – Prepare to fail – Do not fear failure. There is one thing for sure, you will fail before you succeed. Expect failure but don’t fear it. Think of it as a normal part of your business. It is necessary. It is good for your business. It teaches you. It helps you make the right decision the next time. It is super important that you don’t associate failure with quitting. Only those that take action fail and only those that take action succeed.

40 – Pivot, rinse and repeat – Successful entrepreneurs are always adjusting. There are many reasons to adjust. Your customers might ask for a new software feature. Or, the recession might have put your best customers out of business. The price of raw materials might rise one day. Your business and its environment are dynamic. If you are good, you develop a keen eye for changes and make quick adjustments. Most businesses that fail do so because they ignore the world changing around them.

41 – Focus on your customer – You customer keeps you in business and puts you out of business too. If you listen to them, you can improve your products or services. If you ignore they fire you. Customers don’t disappear, they go to your competitors. Reach out to your customers. Ask them questions. Ask what they like or dislike. Welcome negative feedback. Don’t be defensive about it. Negative feedback gives you a chance to improve.

42 – Stay profitable – Staying profitable will solve many problems. The lack of profit could put you out of business even if you have record sales. Forget sales. Forget your revenue. Forget the total number of customers. Always be mindful of profitability.

43 – Manage cash – Entrepreneurs that fail often confuse cash flow with profit. The two are not synonymous. It is possible for you to go bankrupt with record cash flowing into your business. To succeed in business you don’t just need cash flow, you need positive cash flow. With positive cash flow happens when the cash funneling into your business is more than the amount of cash leaving your business. It is simple yet often ignored. The companies that ignore this end up with negative cash flow. This happens when the outflow of cash is more than your incoming cash. You should never allow negative cash flow.

Here are 10 of the most profitable companies in the world:

• Exxon Mobil
• Wells Fargo
• J.P. Morgan Chase
• Berkshire Hathaway
• Johnson & Johnson
• General Electric (GE)

Here are a few ways to improve your cash flow:

44 – Get paid in advance, ask for deposits or full payment in advance.

45 – Be very selective in offering credit to customers, avoid it if possible.

46 – Increase your sales.

47 – Offer incentives for early payment.

48 – Secure loans for emergencies.

49 – Disasters do happen – Even though Warren Buffet has a hands-off approach to managing his portfolio of companies. He does require the CEOs of each of his companies to have a one sheet in case of an emergency. The sheet of paper contains information on key aspects of the company. While the one sheet of paper might be overly simplified the point is that you have to be prepared for the worst.

50 – If you will succeed in business, you must figure out how to deal with the unexpected. It’s not that “what if it happens“, but “when it happens“. What if your best salesperson quits tomorrow? How long before you will replace her? Do you have a system in place, so when you hire a replacement she can sell?

Systems are crucial to recovering from a disaster. Formal procedures are key. Identify the key parts of your business and think about what it would take to recover losing any of them. For example, if your company relies on your e-commerce website, develop a system to recover your site even if your current site crashes and  your hosting company  goes out of business within the same day. You don’t have to be paranoid about it, but create systems of key parts of your company.

Unsuccessful Business Strategies

If you want to succeed in business, you need to learn from unsuccessful business strategies. An unsuccessful business strategy involves a business model which lacks profit. Driving profit is a must for any successful business.

After all, the core purpose of a business os to make a profit. But profit itself isn’t enough to succeed. Companies should focus on constant innovation with a relentless focus on exceptional customer service.

A profit-first approach can be a short-term win but a long-term loss. If you want to succeed in business, you must drive innovation in your industry. Profit is only a by-product of exceptional service.

Exploring additional revenue streams will help companies become more profitable.

In Conclusion

Few places are less forgiving than the business world. Eventually, everything adds up. If your customers prefer your competitors, your employees would rather work for someone else, your partners no longer believe in each other or the business, and the many mistakes you can make along the way. And that is why businesses fail.

Yes, it is true that most businesses fail. It is also true that many of them succeed. Those that succeed are not the result of miracles. Entrepreneurs who lead businesses to success understand that it takes a carefully planned and executed strategy. A little luck also helps.

Why do most businesses fail?

Ineffective business planning is a top reason for business failure. Business planning requires time and effort, that many entrepreneurs are unwilling to invest.

Without a business plan, a business is more likely to fail.

Most businesses fail because they either run out of money, have bad management, or rely on a poorly executed marketing strategy.

The biggest reason most businesses fail is a lack of funding. Without working capital, no business can continue to operate. Payroll, funding day-to-day business expenses, is a recipe for business failure.

Many businesses fail before they have a chance to take off because they lack a successful go-to-market strategy.

Inadequate management is another common reason for business failure. To keep a business going and growing requires a wide range of skills. While the business founders may have the required skills for some aspects of the business, they may not have all of the necessary skills.

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29 comments.

Nice post. Understanding your customer is a crucial point.

What do you do in your business to understand your customer?

Great article! Covered a lot of perspectives. Most owners believe that “knowledge is power” however they should understand that only “applied knowledge” is only the power that works! -great point. Keep up the good work. I love Success Harbor.

Hi Georgia, Thank you for your comment. I hope you keep coming back to read our posts. Let me know if I can help you. George Meszaros Success Harbor

Nice article covered most of everything that is required to build a successful business. I can tell you put a lot of time and effort into this article.

Thank you, Selvam, for the kind words. Come back soon to read more of our content.

All of these are great reasons why small businesses fail. From my point of view it all comes down to this: All successful businesses have a clear marketing strategy that makes everything they do more effective.

Good point, Patrick. Thank you for taking the time to comment. I hope to see you back on Success Harbor soon 🙂

Thank you GEORGE for this tremendous effort to help those who have the business mind, especially people like me who are business students, I really benefit a lot. thank you once more.

Thank you for taking the time to comment. I am glad that you find it beneficial. How much more time do you have left before you receive your business degree?

Hi, I have only one year left Sir.

Thanks George .. please keep updated about reasons of failure in similar pattern. It helps alot.

Great article!

But, I think it is important to differentiate different kinds of businesses, especially venture capital startups versus plain old small businesses. The failure rate for VC startups is much higher than for other small businesses.

Surprisingly, this is by design!

I don’t mean that the VC’s want you to fail at all, they don’t. But what they want even less is for their VC fund to fail. In order for a large VC fund to succeed, they need to make sure they get a couple of GIANT successes. These are billion dollar companies they call “Unicorns”.

A small success just isn’t helpful. I’ve done 7 VC Startups now–I founded 3 and participated in 3 others. My success ratio is actually very decent. 2 of the 3 companies I founded were successful and 1 of the 4 others IPO’d. That’s much higher than the VC success ratio.

It may surprise you to learn that the VC’s would consider all 3 successes to be failures–even the IPO! None of them produced billion dollar results for them even though they all produced 7- to 8-figure results for me. On the very biggest deal, the VC’s initially told us to walk away from a $10 million dollar payday after just 10 months of work because it didn’t make them enough money.

My conclusion after working that world for years is that if you want to succeed, and you don’t need to be a billionaire to call it success, avoid VC’s. Start your own business.

Thank you for sharing your business experience, Bob. Perhaps, one day we could do an interview about your business experience.

George, sure, would love to do an interview! You can track me down any time on my entrepreneurship blog, BobWarfield.com.

Sounds good, Bob.

Thanks for another great article. I especially enjoyed your point “One thing for sure, a business almost always fails because of the entrepreneur.” Which made me smile and frown. Knowing that it applied directly to this entrepreneur. I had discovered through my business consulting that the most successful startups are those by owners willing to look at their strengths and weaknesses, and not hide

Hi Marsha: Thank you for taking the time to comment. Please come back soon.

Hi Vikash, You wrote “almost” all major issues. Can you think of any major issues that are not in the article? I might include them.

I can’t think of any other place where you could find such a comprehensive and realistic article as this one. It covers all the bases in simple to understand language. Yet all around us we know that some organisations are unable to take advantage of the wisdom here. This is basic stuff – 101 primer, but it comes in the type of “simple, but not easy”. Utterly brilliant.

Thank you, Roger. Do you own a business or thinking about starting a business?

It’s my pleasure, George. I’ve started several, bizarrely with an unusually low failure rate, mainly in the supply of software services to investment banks. I sold out some years ago, took some time to look after my son, and then fell into “Obliquity”, a term coined by Sir John Black of ICI, when he first discovered that the best way of achieving an objective was not always the obvious way. It’s worked well for me, and I’m considering if it’s possible to teach others quickly and effectively as a change of direction, rather than doing it myself. What I find frustrating is the number of people who could do well, not taking the small steps that would transform their lives.

We live in a world that craves attention. If you give your attention to a person, or to a meeting, to a seminar etc. just one person can influence the outcome to get the best result for everyone – but particularly themselves. And yet nobody does this. I’ve found it particularly useful in a commodity – like market where clients will dump you for a cheaper competitor in a heartbeat. It took me years to realise that if you sold a commodity, there was no USP other than yourself and a cunning plan. The wasted time spent trying to differentiate our offering from the rest was ridiculous. Besides, if by some miracle you came up with something, the entire market could copy it.

Sorry, George, I wasn’t intending to write this much – it’s just on my mind at the moment. Take care!

I appreciate the detail in your response.

Thank you, George Meszaros, for writing this article! It contained a lot of information that made sense to me, in like normal person writing. I want to start a business after I get into high school, yeah I know, the chances of success are about 20%, if I had to guess, but I am putting in the work now. But thanks for writing this article it’s very helpful.

Thank you for the kind words, Justin. Good luck in high school.

Did you have it easy when you started up as an entrepreneur?

I don’t think anyone had it easy when started a business. Starting a business is hard.

Thank you very much for this article. I think this is the best article ever on why businesses fail. Thank you, and keep it up.

Thank you for the kind words, Dmitriy 😉

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Audience over aggregators: how brands can reclaim power over customer acquisition, how technology can help win the war on financial crime, unified ticketing: how can transport stakeholders ensure interoperability, provenir and trustfull agree global partnership, why some business plans fail.

There are approximately 5.9 million SMEs operating in the UK, but making your business successful in the long-term is difficult. Recent ONS data shows that only 42.4% of businesses founded in 2013 were still active in 2018 .

So, how can you improve your chances of success? Something all business owners need to do is create a business plan . A good business plan is integral to the success of your business as it:

• Helps to clarify the direction of your business
• Can highlight problem areas that don’t make sense or need more work.

Many business owners will use their plan to persuade investors or lenders to fund their idea, but a business plan is not just something you write for external funders and then put away in a drawer when you think you no longer need it.

A good business plan should be an invaluable asset and guide to running your business, and should be something you constantly review and update as necessary .

But why do some business plans fail? For some people, it’s simply a matter of not investing enough time and effort into creating it. However, there are some common problems that can prevent a business plan from becoming successful. Here are seven areas where you might be going wrong.

1. Pursuing a bad idea

It can be hard to admit this, but sometimes business plans fail because the idea isn’t feasible. However much time you dedicate to creating a detailed plan, you first need to make sure your business idea is viable.

For example, you should make sure there is a market for your product or service. Conducting market research is vital for understanding the industry and your potential customer base, and will help you to create a business plan that is less likely to fail.

As well as having a good idea, you will need to research the competition. You could have a great business plan, but it won’t work out if it’s essentially a copy of an already successful and established business. You should consider how your business is different from anything else out there and why you are unique. It’s especially important to highlight this in your plan if you are looking for funding, as investors and lenders will need to be convinced of your idea’s potential for success.

2. Not having the expertise

When creating a business plan, you need to know what you are talking about! So, it’s crucial that you (or a business partner) have the relevant expertise and experience to be able to write a workable business plan, and then put your idea into practice.

3. Not being realistic

If you’re writing a plan for your new business venture, it is easy to get carried away and be over-optimistic about how much money you will make. However, this could be a fatal mistake and could cause your business plan to fail.

Business plans should be realistic about future growth and profits. Over-estimating your income is likely to cause problems further down the line, as you could reach a point where your expenditure is more than the money coming in. Being realistic from the beginning will help you to plan your budget accordingly and give your business plan a greater chance of success.

Don’t be afraid to set high targets in your business plan, with both short-term and long-term goals, but make sure they are achievable.

4. Assuming everything will go smoothly

Focusing on the strengths of your business plan and assuming everything will go perfectly is a mistake of many businesses. If your plan doesn’t factor in any potential future issues, then when you do hit a problem it will be much harder to overcome.

Good business plans will address the challenges your business may face, and then lay out strategies on how to minimise these risks and prepare for any unexpected events .

5. Neglecting the finances

Every successful business plan needs to include detailed financial projections.

Business owners will need to look at costs, trends, and their competitors to come up with realistic and achievable figures for their income and expenditure, which will give direction and structure to their business operations

It is very likely that these figures will change, but it is important to have some benchmarks to aim for. The figures will also highlight any major flaws with your business model (i.e. if you are spending more money than you make), so you can make any necessary changes to your budget.

If you want to use your plan to try to get funding, you will need to show how much money you require and what the funds would be used for.

6. Not checking the spelling and grammar

This may not seem as crucial as the other points but, especially if you’re looking to impress investors or lenders, your business plan should be accurate and without any mistakes.

An error-free business plan will make you appear professional, so make sure you review it and double check (and triple check) for any typos or mistakes.

7. Not believing in the plan

Finally, you need to be determined and fully believe in your business plan. You could have the best business plan in the world, but if you don’t put the time and work in to bring it to fruition then it will be destined for failure.

Creating a good business plan and not giving up when problems occur will give you a better chance of making your business plan a success!

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What We Know About Trump’s Quest for a Half-Billion-Dollar Bond

Donald J. Trump failed to arrange a bond to halt collection of a $454 million judgment. The New York attorney general might begin to collect very soon.

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By Kate Christobek and Ben Protess

Here’s the latest on Trump’s bond in the N.Y. civil fraud case .

Donald J. Trump is running out of time to stave off a financial crisis.

The former president is racing to secure an appeal bond for roughly half a billion dollars in his civil fraud case in New York, but has so far failed.

If he cannot, the New York attorney general’s office, which brought the fraud case, could begin to collect. The attorney general, Letitia James, could have enforced the judgment last month, but provided Mr. Trump a 30-day grace period that expires on Monday.

Ms. James might start slowly. She could even wait for an appeals court to decide whether to pause the judgment, a decision that could come as soon as this week.

But if she wanted to take a more aggressive stance, Ms. James could freeze some of Mr. Trump’s bank accounts, which might send the Trump family business into a tailspin.

She could also seek to seize some of his New York properties, and public records show that Ms. James has formally posted the judgment in Westchester County, a preliminary step toward staking a claim to Mr. Trump’s private estate and golf club there.

In recent days, The New York Times has received many questions about Mr. Trump’s financial woes. Here are answers to several:

What was Trump accused of?

Ms. James took Mr. Trump, his company and his adult sons to trial last fall, accusing them of fraudulently inflating the value of golf clubs, office buildings and other properties to the tune of about $2 billion.

Mr. Trump exaggerated the property values, and in turn his own net worth, to obtain favorable terms from banks and insurers, according to Ms. James.

At the trial, which lasted months, Ms. James’s lawyers argued that Mr. Trump’s company had ignored appraisals and manipulated numbers to sometimes absurd degrees.

The judge overseeing the case — there was no jury — ruled in favor of Ms. James.

How was he punished?

The judge, Arthur F. Engoron, came down hard on Mr. Trump, imposing a judgment of $355 million plus interest, amounting to $454 million.

The judge also imposed penalties that could curb Mr. Trump’s influence over his family business, barring him from serving as a top executive at a New York company for three years.

Can he appeal?

Yes. Mr. Trump is appealing Justice Engoron’s punishments, and has asked a higher court, the Appellate Division in Manhattan, to pause the financial judgment. If the appeals court denies that, he might ask the state’s highest court, the Court of Appeals in Albany.

Although he does not have to pay Ms. James’s office the $454 million while he appeals, he must either cut a check to the New York State court system for the full amount, or, more likely, obtain a bond.

What is an appeal bond?

An appeal bond is a document in which a company guarantees the $454 million judgment, plus interest, should Mr. Trump lose his appeal and fail to pay.

Mr. Trump would need to pledge significant collateral to a bond company — about $557 million, his lawyers said — including as much cash as possible, as well as stocks and bonds he could sell quickly.

He would also owe the bond company a fee that could amount to nearly $20 million.

Does he have enough cash to obtain one?

Short answer: No.

A recent New York Times analysis found that Mr. Trump had more than $350 million in cash as well as stocks and bonds, far short of what he would need in collateral for the bond.

In a court filing March 18, Mr. Trump’s lawyers said they had contacted more than 30 bond companies, and none had agreed to a deal.

But I thought he was a billionaire?

While Mr. Trump has long bragged about his wealth, his true financial position remains something of a mystery. Most of his fortune is tied up in real estate holdings, which bond companies don’t typically accept as collateral.

He also has less liquid collateral available today than he did even a few weeks ago. Mr. Trump this month had to post a $91.6 million bond in the defamation case he lost to E. Jean Carroll. For that, he most likely had to pledge more than $100 million in collateral to Chubb, the insurance company that provided guarantee. That money cannot be used as collateral for a second bond.

What is the deadline for the appeal bond?

There is no formal deadline. She offered the 30-day grace period and now may wait for the appeals court to weigh in on whether to pause the judgment.

How could Ms. James collect?

It could get ugly for Mr. Trump.

Ms. James could start by merely issuing a list of properties and accounts she is eyeing, or sending subpoenas to locate assets. Or she could move swiftly to freeze and ultimately seize his assets.

If she opted for the more aggressive path, Ms. James could send so-called restraining notices to Mr. Trump’s banks and brokerage firms, effectively freezing his accounts.

It’s a powerful weapon, legal experts said. She can send the notices on her own, without needing a judge to bless them.

To then collect, Ms. James can ask a judge to grant her an order directing the banks to hand over his assets to the state.

“The low-hanging fruit for the state to enforce the judgment in this case is to issue restraining notices to banks,” said Daniel W. Levy, a former federal prosecutor who is now a lawyer at McKool Smith in New York, where he has represented creditors in judgment proceedings.

What about seizing his properties?

Easier said than done.

Mr. Trump does not directly own his properties — in general, they are owned by corporate entities that he controls — and Ms. James would have to fight in court to pierce those layers. Even if Ms. James could take control and force a sale, Mr. Trump’s lenders would be first in line to collect.

The most sensible option, legal experts said, would be for Ms. James to pursue New York properties — specifically the buildings directly owned by a corporate entity that was a defendant in Ms. James’s case. That would include Mr. Trump’s Seven Springs estate in Westchester.

If she took control of the property, she could instruct a local sheriff to auction it.

She might also try to seize some of Mr. Trump’s marquee Florida properties, including his Doral golf resort, which was a defendant.

And she has threatened to take aim at his office tower on Wall Street in Lower Manhattan. But Mr. Trump does not actually own it: Instead, he effectively controls the property and pays rent to the owner.

Trump Tower also poses a challenge, because it was not a defendant, nor is it directly owned by one.

The legal experts cautioned that actually seizing any property through the courts could take significant time without a guarantee of a huge payoff.

But should Mr. Trump win delays, they could cost him. Under New York law, he must continue to pay 9 percent interest on the judgment.

Can she throw him in jail?

Although Ms. James can’t jail Mr. Trump — it is a civil case, not a criminal one — Justice Engoron could issue an arrest warrant if Mr. Trump repeatedly flouts court orders. That, however, is unlikely to happen.

What other options does Trump have?

Mr. Trump could quickly sell a property or another asset, or seek a supporter’s help. He might also try to obtain a loan from a bank, hedge fund or private equity firm that he could then post as collateral. The attorney general has suggested that Mr. Trump could pledge his properties to the court.

And his net worth could soon leap when shares of his social media company start trading on the stock market as soon as Monday. His stake is valued at roughly $3 billion. Although he is prohibited from selling shares for six months, Mr. Trump could find ways around that restriction that enable him to raise cash for the bond.

If all else fails, he could have the corporate entities implicated in the case file for bankruptcy, which would automatically halt judgments against them. Ms. James’s penalty against Mr. Trump himself would continue to be in force, and she would most likely seek to hold him accountable for his company’s debts.

Could Trump use campaign money to pay?

Probably not.

A super PAC supporting Mr. Trump’s candidacy can raise unlimited amounts, but it is banned from coordinating with him and cannot pay the judgment.

And although the former president has used a political action committee under his control to pay for lawyers and witnesses in his legal cases, that group lacks the money to address the $454 million penalty.

What else is happening Monday?

Mr. Trump has a crucial hearing in his Manhattan criminal case, which could be the first prosecution of a former American president.

The district attorney, Alvin L. Bragg, has accused Mr. Trump of covering up a sex scandal involving a porn star to bolster his 2016 presidential campaign.

Jury selection was originally scheduled to start on March 25, but the trial was delayed late last week after the disclosure of more than 100,000 pages of records that had been in the possession of the federal prosecutors

Justice Juan M. Merchan set the hearing to determine whether the new tentative trial date of April 15 should hold, and to rule on Mr. Trump’s motion for an outright dismissal.

The Manhattan case is among four prosecutions Mr. Trump faces.

Ben Protess is an investigative reporter at The Times, writing about public corruption. He has been covering the various criminal investigations into former President Trump and his allies. More about Ben Protess

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Here's what happens if Trump can't pay his $454 million bond

Andrea Bernstein

Rachel Treisman

Forty Wall Street, a Trump-owned building, stands in downtown Manhattan. Former President Trump says he can't secure a bond to appeal the $454 million penalty in his civil fraud case. But New York Attorney General Letitia James says she is prepared to seize the former president's assets, including the building at 40 Wall Street, if he is unable to pay. Spencer Platt/Getty Images hide caption

Forty Wall Street, a Trump-owned building, stands in downtown Manhattan. Former President Trump says he can't secure a bond to appeal the $454 million penalty in his civil fraud case. But New York Attorney General Letitia James says she is prepared to seize the former president's assets, including the building at 40 Wall Street, if he is unable to pay.

Former President Donald Trump needs to arrange a $454 million bond to comply with a New York court ruling in less than a week, but the presumptive Republican presidential nominee says he can't find a company to put up the bond.

Trump's lawyers are asking an appeals court to stay the judgment, but the clock is ticking.

How did Trump come to owe the state of New York some $454 million?

Trump ordered to pay over $355M for fraudulent business practices in New York

This is the ruling that Judge Arthur Engoron issued last month , after finding that Donald, Eric and Donald Trump Jr., along with Trump Organization employees, engaged in a decade-long conspiracy to lie about the value of their assets.

In New York, if you make money by persistently committing fraud, you owe the ill-gotten portion back to the state. In this case, Judge Engoron determined that Donald Trump made over $350 million more than he should have if he'd been honest and when you add in interest, you get to $454 million.

Why does Trump have to come up with the money now?

Trump doesn't have to actually pay that money now, but he has to get a company to make a guarantee to the court that they will pay the money if he loses his appeal. That's the bond part.

But to get a bond, you have to put up assets, and in a court filing Monday Trump lawyers said they'd approached 30 companies but that getting a bond was a "practical impossibility," because they'd need a billion dollars in cash, which they don't have.

Trump unable to post $450M bond in New York fraud case, his lawyers say

They submitted an affidavit from an insurance executive who had testified at trial, and whom the trial judge had already discredited.

Trump says he's a billionaire. Why can't he just come up with the money himself?

Trump said during a deposition for this case, taken about a year ago, that he had plenty of cash. He said, "I believe we have substantially in excess of $400 million in cash ." And, he added, it's "going up very substantially every month."

News organizations have estimated that Trump actually has about $300 million in liquid assets — but he already had to set aside $100 million or so to put up a bond to pay the verdict in the E. Jean Carroll civil case . The rest of his money is largely tied up in buildings and golf courses, and while he could sell a property, that can't happen right away. Trump said Tuesday that would be a "fire sale," though he said many times during the trial he could always find a buyer to pay top dollar.

Jury orders Trump to pay $83 million for defaming columnist E. Jean Carroll

While Trump's political action committees have spent millions of dollars on his legal fees, they're unlikely to be of help to him in this case because of campaign finance laws .

Trump has accused the judge in the case of trying to take away his rights, posting on social media that any assets he may be forced to sell would be gone even if he ultimately wins his appeal.

That's a concern that any defendant could raise, whether they're liable for $450 or $450 million, says Adam Pollock, a former assistant attorney general in New York.

"But if you want to bond the appeal — stop enforcement of the judgment — you have to put up the full amount," he told Morning Edition . "That's what the law says. And that's a policy decision that Albany has made."

The deadline is Monday. What does Trump do if the appeals court doesn't rule his way?

He can appeal to New York's highest court and ask that court to stay the judgment. If they don't, he can ask a benefactor or he could try and stall some more until he comes into money from the upcoming sale of his social media company, or he could — though it has many disadvantages — declare bankruptcy.

But New York Attorney General Letitia James has been clear: If Trump doesn't pay, she will move to seize his assets.

"If he does not have funds to pay off the judgment, then we will seek judgment enforcement mechanisms in court," she said. "And we will ask the judge to seize his assets."

Trump's noncash assets run to $3 billion, Forbes estimates, so there's plenty of value there. The law limits the AG to seizing properties that were a part of the case, but there's about two dozen of those, everything from the Doral Golf Club to 40 Wall Street to Trump Tower. She's not limited to New York properties, though there are extra steps if she chooses to go out of state.

She could, in theory, send a sheriff or a marshal to enforce the judgment, and that brings on another legal process with many more opportunities for delay.

Can Trump be forced to pay up?

James can begin enforcement of the judgment immediately after the 30-day grace period expires next week, says Pollock. And there are several devices she can use to try to get him to pay.

For one, he says, she could serve Trump a restraining notice that would restrict his spending in other areas until he pays his bond.

"The restraining notice would say: 'Don't spend money, don't fill up your jet at the pump, until you pay the state of New York, or you'll be held in contempt of court,' " Pollock says. "And my impression is that ... Engoran, the judge here in New York, would be quick to hold him in contempt of court."

He says it's theoretically possible that James' could consider settling, especially if Trump were to write a check for something like $250 million. But short of that, he doesn't see any reason for her to proactively lower his bond, especially since she has the tools to go into banks and drain his accounts.

"The entire trial was effectively a roadmap to his financial assets," Pollock adds. "She can now send out a sheriff or a marshal of the city of New York to go walk into a financial institution holding what's known as an execution and empty his bank account short of $3,000, which is the statutory floor."

Pollock acknowledges that Trump has said he doesn't have $450 million in cash. But if he wants to stave off enforcement, "he needs to find a way to raise it."

• Letitia James
• court ruling
• Donald Trump