Business or Personal? Issues Causing Businesses to Fail



In the course of doing business, it is inevitable that some businesses will fail. However, it is also incumbent on owners of small and medium businesses to study the causes of business failure in order to avoid them. Leaders in small- to medium-sized businesses are often the key factors in success. Therefore, it is also true that personal issues can lead to business failures. Business failures can often be avoided with conscientious study and proper analysis. Here is a list of common issues to watch for that lead to business failure unless corrected in time.

Poor Calculations

Sometimes no matter how hard we work, the supposition at the foundation of our business just does not pan out. This issue can occur when the competition is too large, unexpected circumstances change or products become obsolete. These types of problems can rarely be avoided unless the business can adapt in time.

Owners that are the Problem

Owners can be the problem in and of themselves. There are owners with personality defects that impede growth and success in a business. These issues can include inflated egos, poor communication skills, lack of confidence, lack of experience, avoidance of risk or even just plain stubbornness. If the owner cannot acknowledge and correct personal issues, the business may fail. Owners can ask third-party consultants to come in and assess their business to discover problems of this nature. Third-party consultants do not have an investment in the business, and can offer valuable insight without risking a job or partnership.

Personnel Issues

Besides the owners, other personnel are important to maintaining and growing a business. If those personal are experiencing personal issues such as depression, anger or divorce, they may not be able to give their full attention to their jobs. In small- to medium-sized businesses, personnel have a huge impact on the success of the business. Offering employees counseling or mental health days can help in these instances.

Legal Issues

It is unfortunate to know that sometimes businesses fail due to legal issues caused by employees or customers. Legal issues can drive a business into the ground if they are severe. If an employee is embezzling funds or committing fraud, the business can suffer a loss of reputation. Smaller ethics issues can also cause problems such as a lack of honesty when problems crop up or employees that are not willing to own up to mistakes. Other legal issues can occur when one or more employees are substance abusers or influenced by outside forces. It is crucial to offer proper training to company leadership to detect legal issues before they get too big.

Poor Accounting

Businesses cannot be run for long without proper accounting. It is too easy for funds to disappear or get misappropriated. Most small businesses need to budget carefully in order to keep cash flowing; therefore, poor accounting can cause a large problem in a short amount of time. Having accounting records reviewed by more than one person on a regular monthly or weekly basis can alleviate accounting problems.

Lack of Cash

As we have seen in the last several years, businesses are cyclical and so is the economy. All businesses need to carefully cultivate a cash cushion to help when times are tough. Financial advisors outside of the company structure can offer advice for accumulating cash resources.


Overextending a business is one of the saddest reasons companies go under. When a business allows growth to happen too fast, it cannot always keep up with rising expenses. Business owners need to control business growth with an eye on problematic growing pains. Keeping an experienced financial advisor on retainer can help keep growth under control.

Operational Issues

Without proper guidance, inexperienced business owners may find themselves paying too much for rent, utilities or labor. Undefined roles and expectations can lead to important tasks slipping through the cracks. No business owner can be an expert in all parts of their business. They need to determine their own areas of expertise, and bring in experts to study how the business can become more efficient and profitable in other areas.

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Derek Coulter

Lead Attorney at Coulter Law Group
Derek Coulter has been an attorney for 13 years and specializes in helping people start businesses the right way. He also has extensive knowledge and experience in handling disputes involving Wills, Trusts, and Estates.

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