| Why 9 out of 10 businesses fail |
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Why Businesses Fail By Keith Levenstein 24th July 2006 “A recent report indicated that nine out of ten entrepreneurs fail in the first five years. It was Robert Kiyosaki, CEO of Rich Dad who said that of the 10% which succeed, 90% fail within the second five years. In ten years, 99% are gone. In South Africa statistics show that the main reason for business failure is the lack of financial knowledge by the founder: · 34% of businesses fail because of poor management of financial activities; · 16% because of lack of management competency; · 12% because of inflation and economic conditions; · 12% because of poor books and records; · 11% because of poor sales and marketing · 9% because of staffing problems; · 6% because of union problems. This shows that an amazing 46% of businesses fail due to lack of financial knowledge, poor financial management or poor books and records. This accounts for nearly half of all business failures. The solution is quite clear – an entrepreneur MUST ensure that he is prepared and willing to take control of his finances before he starts his business. Once the business is up and running it is even more vital to keep accounts up to date. Many entrepreneurs find that as they get busy, it becomes difficult to do accounts, and that is the first task they let slide. They simply do not realise how important is it to them to have accurate books and records. How can you make any decision if you do not know where you are currently? How can you make a decent decision without knowing the financial impact? How can you manage your cash flow without accurate books? How can you obtain a loan without accounts? How can you submit VAT returns if your books are not up to date? How can you manage customers if you do not invoice them on time and do not collect your debts on time? Do you know how much you are spending on bank charges, on cell phones, on rent on admin, and what does the trend show? What profit or loss is your business showing? Can you really wait for three months to get relevant financial information from a external accountant/bookkeeper? You really need today’s finances today! The solution. We must increase knowledge and training for small business owners, and potential entrepreneurs. The training must cover the importance of doing books, and how to interpret the accounts in order to make the right decisions. It should emphasise that bookkeeping in a small business is an easy task – it does not require an expensive professional, or a complicated accounting package. In our experience it is possible to spend less than 5 minutes per day doing your books and keeping them 100% up to date. Is 5 minutes too much to spend to have a proper handle on your finances and your business? Issued by:: EconoServ SA cc For more information Keith Levenstein This email address is being protected from spam bots, you need Javascript enabled to view it 083 634 9393 011 483 1190 About Econoserv SA cc Econoserv is a management consultancy, specialising in business, accounting and BEE solutions. Econoserv produces the EconoAccounting package for small businesses. |
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