Why Do Stores Go Out of Business?


Quick Answer

Business failure results from several causes, including poor management, inadequate planning, insufficient funds and inability to compete with others through selling novel products or offering better prices. Some or many factors may contribute to business failure, including operational difficulties within the company and external factors like the economy and market. Although some business failures stem from problems with the owners or upper managers, those individuals usually fail to see issues, while customers generally notice problems first, say authors at The New York Times.

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Why Do Stores Go Out of Business?
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Full Answer

Among the reasons why companies failure, inability to compete with bigger companies ranks among the leading causes. Organizations, especially small companies, fail to sell enough products or the right products to create profits, say authors at The New York Times. They simply cannot compete with larger firms and ultimately go out of business. Clash between owners and employees in personalities and working style also contributes to business failure. Having poor accounting and cash management often hurts companies, as does having insufficient amounts of money to bounce back from hits, such as losing major clients or hitting a downturn in a sales or growth period. In family-owned businesses, operating without a succession plan jeopardizes companies, as no clear plan exists for continuing the business upon owner's death. Lastly, a change in market trends and technology renders some products, such as electronics, obsolete and hurts sales.

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