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The 5 stages of business failure

Why do businesses fail?

As you tour my site, I want you to remain hopeful and optimistic, because there ARE solutions to your business-turnaround situation. But we must also be realistic. So let's look at this issue. Identifying the cause of your business failure — and recognizing it IN TIME — is the first step in turning it around.

Businesses fail in five stages:

1. Management lacks controls, makes poor decisions finacially, in operations and in response to market conditions. Loss of sales momentum.
2. Company fails to meet sales and or profit projections for several months. Beginning of morale problems.
3. Sales and profit decline further. Advertising and other expenses are cut. Reduced cash flow makes paying bills within terms impossible. The company begins to spin out of control, where having fewer assets further decreases sales, which in turn means fewer assets.
4. Declines continue, inventory shrinks. Suppliers have you on COD, threaten collections and legal action. Morale continues to decline, and employees begin to abandon ship.
5. Legal actions are imminent, judgments granted, key employees have departed. You realize expert help is your only chance for survival.

If you have waited until the fourth or fifth stage to seek expert turnaround solutions, I won't kid you. Few companies can recover from stage four of five, but there is often hope.

I always ask the desperate small-business owner why he or she waited so long. The answer is always the same:

"I hoped things would improve without outside help."

Hoping, without acting, kills businesses. You may be in denial of the problems facing your company. I'll show you how to overcome that.

Examining your answer will suggest how you might still pull through.

Click to examine your position in the Stages of Failure