The Real Reason Businesses Fail

I often hear from business owners that the banks won’t lend them any money to run their businesses, or that the banks are making it difficult to borrow.  Some tell me that if they don’t get a loan, they will probably have to close their doors.

This could be true.  But I have found that the real reason businesses fail is because they haven’t satisfied their customers’ needs, wants, and desires. 

I’m not going to say that this is the case 100% of the time, but I’d say it’s probably the case 97% of the time.

When things work out for a company, it means that it is filling the needs, wants, and desires of the customers at a value for which the customers are willing to pay and at a price that is more than it costs the company to provide that value.

It’s really that simple.  Just sell something for more than it costs to make it and you’re fine.  Well almost.

Of course, there are numerous other factors that come into play before a business will be successful.  But no matter what else you do, if the basic value and its corresponding price-to-cost ratio don’t work, the rest doesn’t matter.

So make sure you get that right.

Then add these 3 questions to make sure your business is on the road to success:

  1.  How do I apply today what I learned yesterday?

  2. What do I expect to learn today?

  3. What will I need to change next year to stay ahead?

I challenge you all to keep these questions nearby and answer them each day.   If you don’t have the time to do it each day, then do it at least each week.  The answers could only help you.

I feel that the opportunities that exist today are great and abundant.  Due to advances in communication and the global business community, there are more opportunities for businesses to grow and thrive.

So focus on these fundamentals and you can keep your business from being one of those that fail.

Let me know your thoughts on this by commenting below. 

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9 Responses to “The Real Reason Businesses Fail”

  1. iNSPIREME says:

    This was awesome Ken.


    Ken Varga Reply:

    Inspireme, thanks. I’m glad you found it useful.


  2. Munther Kalai says:

    Yes, I do agree but…. There are so many factors behind staying alive. Quality service and quality product are essentials but you do have to study your expenses. At the end, if you don’t have the right mark up that should cover your other operation expenses then you will not survive no matter what. You do have to do your homework before you enter into the market.


    Ken Varga Reply:

    @Munther Kalai,
    Munther, what you said about staying alive as a business is true. There are many factors, including the ones you mentioned. In my coaching, I show the business owner the many things they have to look at and have in place in order to be profitable. I call this “The Marketing Map”. It is very extensive and takes up to 12 hours to go through at a seminar. I’ve touched on one aspect in this blog article. As time goes by, I’ll touch on other parts of it.


  3. Kevin says:

    While its true, many companies do not pay attention to customer service, 97% may be high. There are other factors, like cash flow, and the need to turn product quickly while keeping vendors happy. Example, a line of credit is essential for successful businesses. You buy product and sell out quickly, thus needing more inventory before you’ve been paid. I have vendors I pay in under 30 days but they want it sooner!


    Ken Varga Reply:

    Kevin, I appreciate that we can agree to disagree :) Everything you mentioned in your comment is so true in running a business. Many businesses can’t make it without a line of credit and I agree that it is getting more and more difficult to convince the banks to extend them to the business community. From a financial viewpoint, product turnover is critical also to creating a successful business. So what you state is very true for any business to succeed. My main reason for writing what I did, was because money is so tight today that a business has to start thinking out of the box and pay more attention to satisfying their customer/clients need, wants and desires. If they do that and also have product turnaround and a line of credit, then they are way ahead of the game. Again, thanks for your comment and let me know if this answer helps.


  4. I will utilize these 3 questions daily on my road to success.


    Ken Varga Reply:

    @Valerie Howard,
    Valerie, great! They will really help.


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