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Businesses need effective process, the focus of leadership and structure that can stretch to enable the company to grow safely as a massive 55% of businesses fail in their first five years of existence. The observers offer banal opinions as to why this happens. I continuosly observe three key reasons why this tragedy happens so often and to so many individuals with different backgrounds, qualifications and knowledge.

The primary reason is insufficient market understanding.

No foresight. For example People dream up the idea, create the product and then expect the market to come and buy. In this connected age there is no excuse for lack of investigation before wasting any time and money on designing a product until you have firm evidence there is a market.

The second reason is lack of understanding of fundamental facts about business.

The majority of folks starting a business know their trade, how to deliver a service or build a product, but know very little about running a company.  Being able to understand and follow the balances in the Income statement or the balance sheet is an essential skill. The basic knowledge of accounting is rarely imparted well by the business books, internet resources and those in the know such as CPAs and bookkeepers. This domain is further complicated by software companies and their partners peddling small business accounting software at fledgling businesses.

Small business accounting software isnt a complete answer.

Large corporations way back figured out that all of their Information systems should be joined together to give them a total view of the business and then along came ERP software solutions and packages. One technology business NetSuite had the foresight to see the gap in the market and began selling its small business ERP software. NetSuite competitors have seen the gap as well and as a result cheaper easier to use solutions have appeared.

The third reason companies fail is because of a dirth of process and procedures that put in place the vital disciplines and consistency a business must have to work efficiently.