Jessie Hagen, a consultant of an U.S. Bank studied a large number of cases of business failures in various sectors in different parts of the world and came out with a brilliant analysis of the most important reasons why businesses failed.

Every one is very eager to know how a person succeeded in business. Be it a Narayanmurthy of Infosys or C.K.Ranganathan of Cavincare or Anil Agarwal of Sterlite. The most important thing one fails to understand is that for every one success of a business venture, there are umpteen failures. The success stories are dissected more often, but failures are never post-mortemed. There are lessons for every businessman in a business failure. An understanding of the possible reasons of a business failure will help to protect the potential down-side of the business.

From the results of the study, it may be said that ‘while every business success is unique in its own way, the failures have a common pattern ‘. The results below of different factors of business failures will provoke introspection in the minds of every businessman, so that he does not contribute to percentages stated hereunder:

General Business Factors

• 78% - Lack of a well-developed business plan, including insufficient research on the business before starting it.
  


• 73% - Being overly optimistic about achievable sales, money required and about what needs to be done to be successful.
  


• 70% - Not recognizing, or ignoring, what they don't do well and not seeking help from those who do well.
  


• 63% - Insufficient relevant and applicable business experience.

Financial Factors

• 82% - Poor cash flow management skills/poor understanding of cash flow
  


• 79% - Starting out with too little money.
  


• 77% - Not pricing properly - failure to include all necessary items when setting prices

Marketing Factors

• 64% - Minimizing the importance of promoting the business properly.
  


• 55% - Not understanding who your competition is or ignoring competition.
  


• 47% - Too much focus and reliance on one customer/client.

Human Resource Factors

• 58% - Inability to delegate properly - micro-managing work given to others or over delegating and abdicating important management responsibilities.
  


• 56% - Hiring the wrong people - clones of themselves and not people with complimentary skills, or hiring friends and relatives.