ENTREPRENEURIAL FAILURE

Entrepreneurial success is not the result of a single person’s efforts. There is always a team involved. The team is made up of other investors, working partners, employees, vendors, and clients. All play an important part in the success of the enterprise. Although other people are involved, there is a tendency to believe that they play far less important roles and are easily replaced. At the end of the day, success or failure of the enterprise will be largely attributed to the entrepreneur.

There are number of reasons for failure of a new venture, which are discussed below. Usually, there is a combination of reasons rather than one single reason.

 LACK OF EXPERIENCED MANAGEMENT

 One of the main problems faced by new enterprises in that the management team is usually very new to this role. The entrepreneur and his/her top management usually have no prior record of being in charge of the fortunes of a whole company. Even in some race cases, when the management has some individuals who have led a company in the past, they are now faced with a new situation where the company itself has no previous track record. It is a very different kind of situation.

 FEW TRAINED or EXPERIENCED MANPOWER

Shortage of skilled and experienced manpower is faced new ventures, which represent a riskier job opportunity. Most people prefer to work with a well-established organization employing hundreds of employees and having a stable track record. New ventures are also reluctant to use manpower for and to invest in training. Lack of experienced and skilled manpower can lead to a general drop in productivity and quality of output. The absence of quality manpower is particularly felt during a crisis.

 POOR FINANCIAL MANAGEMENT

Operational issues keep an entrepreneur busy and as a result, financial management is likely to get neglected. Often, the entrepreneur may find the technicalities of accounting and finance intimidating and avoid looking deep into it. Common errors in financial management can be bad receivables management, unproductive investments, and poor budgeting decisions.

 RAPID GROWTH

Sudden unplanned growth is not always a desirable situation. Higher growth will mean greater stress n production facilities, manpower, and marketing channels. Sometimes, these will not be designed to cater to the rise in volumes and might need further capital investments. It will lead to a stage of continuous firefighting and ultimately, many things may not keep pace with the growth. Most commonly, the organization may run out of money.

 WEAK MARKETING EFFORTS

Entrepreneurial firms are very reluctant to spend on marketing effort. Investing in a marketing campaign is not going to give you assured returns and the link between the marketing expenditure and sales is not very easy to establish. An investment of Rs. X in raw material will give you a very tangible Y kg of output but a similar investment of Rs. X in a newspaper insert will not give you a sale of Y units, which you can demonstratively tie into the newspaper insert.