The Top 10 Reasons Why Businesses Fail

According to the U.S. Small Business Administration, your chances of making it in business for five years or more are roughly 50/50. Okay, so the odds could be better, but they could be a whole lot worse too. As is true with so many things in life, much of how you perceive your odds depends on your attitude. If your attitude going into any new business venture is that failure is not an option, then maybe it just won’t be. One thing IS for certain ― having a great attitude won’t mean anything at all unless you take the necessary action to support it. And taking the correct action depends on having the knowledge you need to do what you should or should not be doing at exactly the right time. Whether it’s at start-up or even if you’re three years into growing the most promising business there is, no one DOESN’T fail by accident! Simple as it sounds, the first step on your road to deciding whether or not to start your own business ― whether it’s in the form of a home-based or other small business, franchise, licensee opportunity or distributorship ― is to build your knowledge about the potential pitfalls right up front. Of course, that kind of homework takes a lot more time and certainly space than we have here, but that doesn’t mean we can’t get you thinking. To that end, here’s a broad-brush look at the top-ten reasons why businesses fail: 1) Inability to Manage Loss of Revenue ― This is perhaps the biggest contributing factor to the failure of businesses today, due largely to the current economic downturn. However, a good number of businesses fail for this reason even when times are good. While it’s true that recent hard times have caught many businesses off guard, the ones that are especially at risk for failure are those that have no back-up plan for how to survive when times are tight. Successful businesses are constantly scrutinizing their operating expenses, receivables and inventory, as well as the prices they’re charging for the products and services they provide to figure out how to cut costs and keep the cash flowing. In essence, they are always one step ahead in planning for that rainy day ― okay, sometimes it’s a tsunami! Of course, all the planning in the world won’t mitigate every business casualty out there, but staying one step ahead of the economy’s inevitable highs and lows sure helps. 2) Not Enough “Know-How” ― You may know how to build a widget better than anyone else, hands down, but having the technical expertise to run your business is only half the battle. Why? Because running your own business requires tremendous acumen in doing just that ― running a business. And believe us when we say that running things is much more complicated than it might seem. Owning your own business requires a perfect balance of ownership with actual management skills in everything from human resources and accounting to marketing and financial planning…and everything in between, which is why having an experienced mentor to advise and counsel you is so important. And, as a general rule, when it comes to choosing just the right mentor(s), it shouldn’t be a friend or family member! Rarely are these individuals the successful, experienced entrepreneurs you need and can count on to give you objective feedback. 3) Inadequate Business Planning ― Countless books and articles have been written on how to write a sound business plan. Some plans are complex, while others are relatively simple and straightforward. All of them are entirely necessary, especially if you need to secure start-up funding for your new home-based or other small business. Amazingly, many small business owners who have the resources they need to get going just jump right in with no plan whatsoever. Guess what? Statistically, they don’t do very well. In addition, too many entrepreneurs get into business for reasons of ego as opposed to identifying a legitimate need in the marketplace and then filling it. Or, they don’t do their homework and then make a true novice misstep, like picking the wrong location or trying to compete with an already well-established competitor without a clear and distinctive marketing plan. And guess what? Those businesses oftentimes don’t last very long. Bottom line…any start-up, no matter how big or small, needs a sound business plan from the outset if it has any chance of succeeding over the long-term. 4) The Two Cs: Capital and Credit ― Securing start-up capital for your new business is just the tip of the iceberg. Far too many anxious entrepreneurs think that if they have the money they need to just get things going, that’s plenty. Actually, that’s just plain crazy. Even the businesses with the best plans for success take at least three to six months to make any kind of profit…and that’s assuming everything goes according to plan. To be safe, you need to have money over and above start-up to sustain you throughout the first year. Also, be aware that overspending in the first year can be a real problem, especially if you’ve got big dreams, good credit and even remotely inflated expectations. The key is to not spend money you don’t have or that you are not absolutely sure you can’t get back. This holds true when it comes to fixed assets ― computers, phones, machinery, equipment ― as well as liquid assets, such as inventory. 5) Marketing Failures ― This one is simple and really straightforward…you must have a really strong and well-conceived marketing plan. No “seat-of-your-pants” marketing will do if you want to have a real shot at succeeding in any business, especially in the first few years when you must make a name for yourself and establish a loyal client base. 6) It’s All About the Where! ― The old adage that location is everything really holds true in business. Depending on your product or service, foot traffic may be critical to your doing well. If you’re off the beaten path, that’s not good. Of course, a lack of traffic can be made up for with a good, solid marketing plan, which goes back to our last point. If your products and services are being marketed online, especially in whole or even in part, then hiring a company that does SEO (Search Engine Optimization) work is a necessity. Remember, with the advent of the internet, the “where” of your business venture is not just real, it’s also somewhat virtual. 7) It’s Not Personal, It’s Business ― Yes, it’s everyone’s favorite line when they have to do something they don’t like in business, but it doesn’t just apply when you’re trying to justify a hard-to-make decision. The fact is that way too many self-employed or other small-business owners go under every year for the reason that they can’t separate their business expenditures from their personal finances. You’d think it’d be common sense to NOT use that latest check from a client to pay your car payment, and you may think you’ll earn it back in no time and just replenish the stores. Trust us when we say it rarely works out that way. At the end of the day, any smart business owner does everything on the up and up at all times and ensures that any business-related funds stay where they belong ― in the business. 8) Letting the Competition Get Ahead ― Of course, competition will kill you every time, but only if you let it. It’s amazing how many businesses find their groove and then figure that things will always stay the same, so much so that they don’t have to change with the times and, more importantly, the competition. Fact is, when it comes to competition, the only thing that’s certain is that there will be change. The truly savvy and successful entrepreneur is constantly scoping things out in an effort to always stay one step ahead. 9) Growing Too Fast ― Growth sounds like a good thing and it is! Who doesn’t want their business to grow and grow and grow, right? As long as growth is anticipated and planned for, that means it can be managed and that’s good. However, overexpansion usually connotes a lack of preparation, and that can be deadly. Keep in mind that, especially in the first few years, slow and steady is what will oftentimes win the race when it comes to the long haul, which again circles back to the point about first-year funds ― if you’ve got what it takes to sustain you, you won’t be in such a hurry that you risk losing it all by moving too quickly. 10) Failure to Employ New Media ― The importance of developing and maintaining an online presence in business is becoming more and more critical with each passing year. Having a business website to drive traffic and develop and maintain customer relationships is pretty much a necessity today. In addition, SEM/SEO (Search Engine Marketing/Search Engine Optimization) are terms and specialties that any smart business owner needs to know and value. Add to all this the very real and growing impact of what’s being termed “social media,” and you have some of the most powerful elements of any contemporary marketing plan. Today, businesses of all sizes and kinds choose NOT to employ at least one of these new media options at their own peril. So beware!

Blackstone, Carlyle set to buy Anil Ambani's RCOM towers

MUMBAI: Reliance Communications (RCOM) has entered into exclusive negotiations with private equity consortium of Blackstone and Carlyle to sell its tower unit, with a deal likely to happen by December, said a source directly familiar with the process. The transaction is expected to value the tower asset in excess of $3.5 billion making it India's largest PE deal till date. Blackstone is likely to be the lead investor in the buyout transaction for which discussions were now advanced. Anil Ambani-controlled RCOM may conclude a tower sharing deal with his elder brother Mukesh Ambani-owned Reliance Infotel ahead of the tower unit sale which could buoy the PE investors. "We have shortlisted Blackstone and Carlyle consortium from three initial bids, and we are talking only with them for the sale of tower unit. The commercial offer has come and we hope to close the transaction by December," said the source mentioned earlier. This source, however, declined to discuss valuation of the tower unit with 50,000 odd towers. TOI first reported that Blackstone and Carlyle were evaluating a joint bid for the tower unit, which was put on the block with parent RCOM wanting to retire a substantial part of the Rs 32,000 crore debt on its books. A second source said tower sharing deal with the Mukesh Ambani firm may help the valuation of the tower unit for which the private equity consortium had offered a base price of $3 billion. "The tower sharing deal is most likely to boost the valuation," he said, as RCOM may be eyeing a deal at around $4 billion. Mukesh Ambani's Infotel holds pan Indian spectrum for broadband wireless access, which it had won last year, and now wants to start a major roll out next year. It would make an upfront payment of around $100 million as part of this long-term tower sharing arrangement. A spokesperson for RCOM declined to comment on speculation. RIL too refused comment. The tower sharing will strengthen the tenancy ratio-the number of tenants per tower-of RCOM's tower unit, which stands at 1.74. A tower company can have more than one operator as a tenant which basically determines its profitability. An industry player says a tower company can double its tenancy ratio without making any capital expenditure. Getting on board Reliance Infotel as a tenant can easily take up the crucial tenancy ratio depending on the number of towers that are leased out. An analyst tracking the telecoms sector, on conditions of anonymity, said that tower unit's tenancy ratio, which is rather moderate right now, can easily move up to over 2 if all the towers are leased out to RIL. "It is not very difficult to have a ratio of 3 but Indian tower companies have not been able to do that successfully." Typically, a monthly rent of Rs 20-25,000 is charged by tower companies to rent out their infrastructure to operators in India depending on the location of the towers.

Westinghouse Electric Corporation enters Indian home appliances market

NEW DELHI: US-based consumer durables firm Westinghouse Electric Corporation today announced its entry into the Indian home appliances market, targeting sales of Rs 200 crore in the next three years. The company said it will invest Rs 70 crore on marketing and product development in the next three years to acquire a significant share of the estimated Rs 6,000 crore home appliances market currently dominated by Philips and other homegrown firms like Usha Lexus and Bajaj Appliances. "Our goal is to achieve sales of Rs 200 crore by 2014. We are launching our products in a phased manner starting with North India. By 2013, we expect to go pan-India," Westinghouse Appliances India Director (Sales and Marketing) R Venkat told reporters here. The company today launched kitchen appliances, including mixer, electric pressure, fryer, grill and microwave oven. It also plans to introduce airconditioners in India later. Westinghouse Electric Corporation had an annual sales of a USD 2.6 billion globally last year and has presence in various segments, including consumer electronics, lighting and domestic appliances. Hong Kong-based W-Lifestyle Ltd and Dubai-based Mapana Middle East FZCo are the global licensees of the brand, under which the Indian operations will also come. "Going ahead we believe that 30-40 per cent of our revenue will come from emerging markets. While there are already big players in India, we feel that this is the right time to enter as the country still lacks varieties in products," W-Lifestyle Limited and Mapana Middle East FZCo Chairman and Founder Bert Doormalen said. The company said its products will be positioned in the mid to premium segment of the market and will be available in traditional retail outlets. Asked if the company will look at setting up a manufacturing plant in India, Doornmalen said: "If there is economy of scale, we will definitely look at it. At present, we have tied up with local partners to make some of our products here."

Oil cos ONGC, HPCL, OIL, IOC and others may run out of cash to buy oil by December

NEW DELHI: India is staring at an energy crisis after December as staterun refineries will start shutting down because they will run out of money to import crude oil, Indian Oil Corp Chairman RS Butola said after declaring the company's biggest quarterly loss. IOC posted the second successive quarterly loss because it has not been compensated for selling kerosene, cooking gas and diesel below market rates. This is forcing IOC to buy crude oil with borrowed money, but banks cannot endlessly support this as the company's borrowings have surged to over Rs 73,000 crore and it is unable to raise prices of fuels. "We will face problems in raising money after December. Means, we will not have enough money to import crude. We will be forced to shut down some refineries and supplies will suffer," Butola said. Oil companies are trapped between the government's political and economic compulsions, which are blocking moves to pay subsidy or to raise fuel prices: The government is under strong political pressure to freeze fuel rates as inflation is already high while the finance ministry, which is struggling to meet its fiscal targets, is looking for ways to raise revenue and reduce expenditure on subsidies. Brent crude was trading at $114 on Wednesday, down from the previous day's high of nearly $116, but still too high for Indian companies. The International Energy Agency said oil prices would head towards $150 if adequate investments are not made in the Middle-East and north Africa. Butola said the company had reported its "worst ever" loss of Rs 7,486 crore in the second quarter of the current fiscal after the government did not pay it a penny to compensate its Rs 11,757-crore revenue loss.

Paradip Port capacity to touch 250 mt in 10 years: G J Rao

PARADIP (ODISHA): The capacity of the Paradip Port will be enhanced from present 57 MTs to handle 250 MTs of carogo during next decade, its chairman G J Rao said here on Thursday. Rao said this after unfurling the port flag on the occasion of auspicious "Kartika Purnima" and "Port Day". The PPT chairman handed over "Shuva Kalasa" (holy earthern pot) to seven Sadhavas (symbolic merchants) to be placed in a decorated boita (ship), popularly known as "Boita Bandan", the symbolic celebration of the state's maritime past. Rao presided over the state level function as the Chief Minister Naveen Patnaik did not turn on the occasion. Patnaik was not taking part in any celebration due to the devastating floods this year. Odisha had a rich maritime history. However, it was came to a halt between 12th and 19th century. But, late Biju Patnaik, the legendary figure of Odisha had set up the Paradip Port, which is one of the mjor ports now in the country, Rao said. The sadhavas of Kalinga (the ancient name of Odisha) on this day ventured into the sea for business in Java, Sumatra and Bornio with the help of northern wind. Before their departure, the boitas were worshipped by wives of sadhavas (known as Sadhavanis) so that they will be saved from anykind of eventuality in the mid-sea by the blessings of goddess "Mangala". Among others, the deputy chairman, A C bose, Secretary N K Mishra attended the colourful function.

China tries to rein in Internet with new threats

China's censors are trying to keep online criticism and rumors from reaching a broader audience, issuing new orders prohibiting news media from reporting Internet postings before they are verified. The regulations, dated last month but posted Friday on the website of the state press administration, ban journalists from reporting any information taken from the Internet or cellphones without firsthand verification. The regulations say reporters or editors may be barred from working in media for five years as a penalty. The rules are the latest attempt by the authoritarian government to reassert control over the flow of information that is being challenged by the popularity of social media.

Google drops Gmail support for BlackBerry users

Google, maker of Android software for mobile phones, will stop supporting the application forGmail for rival Research in Motion's (RIM) BlackBerrysmartphones. "Beginning November 22, 2011, we will end support for the Gmail App for BlackBerry (installed native app). Over this past year, we've focused efforts on building a great Gmail experience in the mobile browser and will continue investing in this area," Google said. This means that from November 22, Google will stop supporting Gmail application for BlackBerry devices and the Gmail applications currently running on the BlackBerry will no longer be maintained and enhanced by Google. However, users who have already downloaded the app may continue to use it, the company added.

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China's No. 1 target is the US, next is India: George W Bush

MUMBAI: Former US president George W Bush on Tuesday delivered a blunt warning to Indians about the intentions of China. The former president who has courted trouble in the past with his aggressive and overthe-top assertions said China was looking to upstage India. "China's No. 1 target is the US, next is India," he told a group of select CEOs at a late dinner meet on Tuesday. Bush, the two-term president whose reign saw a dramatic improvement in Indo-US relations, also said his country's patience with Pakistan was wearing thin, according to one of the participants. "If the US had not befriended Pak, Pak would have become more dangerous. But now US patience is wearing off," he said. In the course of a free-wheeling discussion, Bush also touched upon a number of important topics. He cautioned businessmen never to do business with Russia and said the EU would have a completely different look in five years but the euro would stay. "If Iran goes after Israel, the US will go after Iran," Bush said, referring to the tense stand-off in the Middle-East over Iran's nuclear weapons programme. "While making history, timing is most important," he added. Those attending the dinner meet included HDFC Chairman Deepak Parekh and ICICI Bank Chairman KV Kamath. Closed-door dinner RPG promoter Harsh Goenka, GVK group promoter GVK Rao, Bajaj Auto chairman Rahul Bajaj and IIFL promoter Nirmal Jain were also present. "This event was kept a secret because the main condition from George W Bush's office was that there will be no announcements about this engagement and no media coverage given to it. Even the list of guests was kept secret," said a senior executive from ICICI Lombard. The visit was organised ICICI Lombard and Fairfax Financial Holdings, a Torontobased company that owns 26% of the Indian general insurance company, and was attended by their top officials from India and the US.