In our previous article, we identified the main causes of business failure based on our research.
As part of the findings of this research, it was identified that businesses can avoid failure by implementing the suggestions below:
1. Excellent management, with the ability to:
- Identify cash flow problems early enough before they escalate. If they are identified early enough, failure might be averted. Therefore managers need to be aware of the symptoms of cash flow mismanagement such as overtrading, and if identified, remedial action needs to be taken.
- Allocate business resources - the right amount at the right time. For example, the right staff doing the right job, marketing at the right time, being able to distinguish between capital and revenue expenditures, and borrowing for the right term and purpose.
- Commit to further education or training if the need arises. Training needs might be for the owner and/or staff. Whatever the case, they should be identified early enough before disaster strikes.
- Avoid fraud or tax evasion. Owners or directors of businesses that have committed fraud risk being banned from acting as directors for a couple of years and the businesses may be closed or fined.
2. Get advice from suitably qualified professionals.
Evidence shows that businesses that access professional advice are less likely to fail.
3. Identify failure symptoms early enough, such as:
- Overtrading.
- Lack of control over cash.
4. Excellent and realistic business plan.
The business plan can be considered as a business‟s foundation. A good plan may facilitate the ability to raise finance and may also enable problems to be identified early enough.
5. The owners' ability to convince lenders to part with their money will determine the business's ability to raise funds. This "ability" is a skill that is innate in some people, but others have developed it.