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11 Reasons Why
Each year, almost as many companies go under as are born. Businesses fail for any number of reasons, but the ones that survive and thrive can learn a lot from those that closed their doors.
“Every new business owner believes he or she has an idea that will change the world
and make them rich in the process,” says Jim Houtz, a serial entrepreneur. “The
problem is that a great idea is never enough. The entrepreneur must be able to back
that idea up with sound business practices and systems, strong management, and the
ability to grow an idea into a company. Unfortunately, these skills take time and
Perhaps the most successful businesspeople are the ones who had several failures before they hit the jackpot. “In business, as in life, your mistakes are the best teachers around,” says Houtz. In his new book Grow The Entrepreneurial Dream, he identifies, based on 40 years of personal experience and independent research, the 11 main reasons why businesses fail.
“Ask any business owner whose company failed the reason why, and I bet he or she tells you it was due to a lack of money,” says Houtz. “Without a doubt, lack of capital is the biggest perceived reason for failure, but only in isolated cases is it the main cause. In the vast majority of cases, lack of capital is the result of another fatal flaw in the business.”
So why do most businesses fail? Houtz’s 11 reasons are as follows:
1. Lack of capital.
2. Limited investment by management.
3. Management team ineffectiveness.
4. Unrealistic business plan.
6. Too many new products released before establishing a core.
7. Big company expertise from former corporate executives is not applicable to a smaller business.
8. Defective products or services.
9. Inability to develop and grow your employees.
10. Failure to obtain money before it is needed.
11. Low integrity level.
Houtz notes the biggest mistake entrepreneurs make is they overestimate their financial projections.
“Many businesses fail before they ever begin, because the business plan they have
laid out is unrealistic or worse – there is no business plan,” says Houtz. “I’m
amazed by how many entrepreneurs don’t take the time to commit a plan to paper. The
business plan is not written in stone. In fact, the businesses are fluid and able
to adapt to circumstances that weren’t anticipated before the launch of the company. But
the important thing is to have some type of guiding tool. Without knowing where you
want to go, how will you ever know if you get there?”
About Jim H. Houtz -
Jim made his mark with CyCare, an electronic healthcare documentation company that he founded in the late 1960s with an investment of $1500 and 10 shares of IBM stock. By the early 1980s, he took the company public, and then acquired 18 other companies before selling the business in 1996 for $270 million. In his final year of owning the company, CyCare reached an annual revenue of $76 million. HBOC purchased the company.
Keep up with Jim Houtz by following is blog at