1.9 Why New businesses fail

Lack of record keeping

New businesses may take record keeping for granted - i.e. keeping record of their sales, invoices, receipts. These are necessary to help with convincing bankers on their performance and track record. Without these - new businesses struggle to obtain additional financing if needed to sustain their business. 

Lack of Working Capital

Working capital refers to the cash in hand that the businesses should have to ensure day-to-day operational expenses are properly managed. Insufficient working capital may lead to loss of sales - for example not having enough cash to pay wages to workers would lead to loss of productivity among workers and eventually loss of sales in the long run. 

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Poor Management Skills

New entrepreneurs may not possess all the skills needed to be a successful leader - and the lack of some management skills may potentially lead to business failure, for example not able to lead a team or motivate them to work towards the company's goal.

Changes in Business Environment

New businesses who do not adapt to changes in the business environment may stand to lose out. For example if there a change and growth in producing safe and environmentally products as consumers prefer them - this is something worth considering as this has an impact to sales.