Companies need effective process, the focus of leadership and structure that can adapt to enable the company to grow safely as a massive 55% of businesses fail in their first five years of existence. The experts offer useless ‘insight’ as to why this happens. I continuosly observe three key reasons why this tragedy happens so often and to so many individuals with different experience, education and knowledge.

The primary reason is insufficient market understanding.

Refusal to look at the water ahead. For example Individuals have the concept, build the product and then sit back and wait for the market to come and purchase. In information age there is no excuse for lack of research prior to wasting any time and cash on designing a product until you have firm evidence there is a market.

The second reason is lack of comprehension of the basics of business.

The majority of folks starting a company know their trade, how to deliver a service or manufacture a product, but know very little about running a company.  Being able to read and track the numbers in the P&L or the balance sheet is an essential skill. The basic knowledge of accounting is rarely imparted well by the business manuals, online resources and those with the knowledge such as CPAs and bookkeepers. This subject is further exacerbated by software companies and their partners pushing small business accounting software at fledgling businesses.

Small business accounting software is only half of the solution.

Until recently ERP software solutions and packages were only affordable by larger enterprises who had figured out that the back and front office systems need to be joined together to give a comprehensive picture of the business. One technology business NetSuite had the foresight to see the gap in the market and started offering its small business ERP software. NetSuite competitors have since emerged.

The final reason companies fail is because of lack of process and procedures that put in place the essential behaviours and consistency a business must have to perform efficiently.