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11 Reasons for Business Success or Failure

Eric Coggins has degrees in political science, global management, and global organizational leadership. He teaches international business.

Explore 11 key factors for organizing and maintaining an effective business in the 21st century.

Explore 11 key factors for organizing and maintaining an effective business in the 21st century.

What Makes a Business Fail or Succeed?

Since the housing bubble burst in 2008, many businesses have struggled to stay above water. The lack of discretionary income for consumers left many business operators scrabbling for strategies to keep their organizations alive and well. This article explores 11 reasons why some businesses succeed while others fail.

Determining Factors

  1. Empowering Leadership
  2. Well-Defined Vision
  3. Relevant Knowledge of the Business Market
  4. Detailed Business Plan
  5. Assessment of the Direct and Indirect Competition
  6. Availability of Financing
  7. Solid Customer Relations Management
  8. Well-Managed Supply Chain
  9. Proper Timing
  10. Well-Devised Decision-Making System
  11. Government Regulatory Measures

1. Empowering Leadership

The first factor for business success is empowering leadership. This type of business management style has also been called transformational leadership. Transformational leadership is the type of motivational style that draws others in and inspires them to achieve something greater than themselves. However, the employees and staff members do not merely do the work; they also become better people in the process.

More and more enlightened employers are learning that employee satisfaction has a direct impact on the quality and sustainability of the enterprise. In fact, companies like Google have paved a new road of follower-centered leadership by offering services that help employees feel wanted and make their lives more efficient and effective. Such services can include company buses to pick up employees, in-house fry cleaning, and in-house daycare services. When employees are able to worry less about day-to-day issues outside of work, then they feel empowered to think creatively about their work.

2. Well-Defined Vision

The second factor of business success is a well-defined vision. A corporate vision is a scripted understanding of what a company wants to do and how they want to accomplish it. A well-defined vision allows members of an organization to unite for a common cause with a singular aim and all energy focused in one direction.

No matter which leadership theory one espouses, all leadership theories identified with positive outcomes include vision as part of the make-up of a successful company. Organizations that actively scan the horizon and tweak and sometimes redefine their visions will more likely maintain a sustainable competitive advantage.

3. Relevant Knowledge of the Business Market

A third factor for business success is relevant knowledge of the business market. In order to do anything well, a person or company must do their homework to gain a deep understanding of the factors that are essential for success. These days as the World Wide Web continues to expand, there is no excuse for a would-be entrepreneur to lack knowledge of whatever business they feel led to pursue. Sadly, many businesses are dead out of the gate because they do not take the time to gain a proper perspective on the industry.

4. Detailed Business Plan

Another factor for business success is the formulation of a comprehensive business plan. Knowing about an industry and sketching out a vision is only the beginning of a successful enterprise. The next step is to take what you know and what you want to accomplish and write a detailed strategy for how to make it happen. A business plan covers all the related factors that are essential for a winning enterprise, including vision, description of the market, projected financials, employee relationships, and customer relations management (CRM).

5. Assessment of the Direct and Indirect Competition

When getting ready to implement a new business, another important factor for success or failure is the nature of the direct and indirect competition for the same product or service. For instance, a person or group wishing to open an online outlet for used furniture should take adequate time to research how many other competitors are trying to do the same thing. When doing the research, the group should ask: Who is the competition? What products and services do they offer? What is their pricing structure? What kind of shipping do they offer? And the like. Gaining a firm grasp of the competition can definitely make the difference between staying alive long-term or filing for bankruptcy.

6. Availability of Financing

A sixth factor important to the success or failure of a business is available financing. The current economic crisis in America has made venture capital difficult to find. Of course, if a company can manage to avoid using credit altogether, then this is not a problem. Still, most new businesses need some kind of seed money to get them up to speed, and thus the ability to secure working capital is critical to keeping the doors open.

7. Solid Customer Relations Management

A seventh reason for business success or failure is how a company relates to its customers. This seems like a no-brainer, but the better an organization handles its client base, the more apt it will be to stay in business. Enterprises that take time to think out common and uncommon situations before they encounter them will be more likely to keep customers coming back. Those groups that merely define their customer relationships on the fly or in the heat of the moment are doomed to fail.

8. Well-Managed Supply Chain

Another reason for business success or failure is how a company manages its inventory. In order to keep the right mix of products on the shelves, an enterprise needs to think through its supply chain processes. Too much inventory can tie up working capital, but too little inventory can lead to shortages and lower customer satisfaction. JIT (or just-in-time) inventory management is one supply chain strategy that has benefited such large organizations like Walmart, Dell Computers, and Toyota Motors.

9. Proper Timing

A ninth reason for business success or failure is timing. In 1998, when the latest housing boom began, it was probably a good time to enter the home mortgage industry; in 2006, when the housing bubble began to burst, it was probably a poor time to set up a new mortgage outfit. Part of learning about an industry is getting a good feel for its business cycle, although trying to time the market can lead to indecision.

10. Well-Devised Decision-Making System

Decision-making is at the heart of any business, and the best organizations have outlined a step of procedures involved in the decision-making process. Those entities that tend to practice participative leadership allow representatives from all departments to be involved in the process and seem to gain stronger employee buy-in. Most poorly led organizations do not encourage participation and often lack a well-defined procedure for making decisions. One solid decision-making scheme is the nine-step problem-solving model. The steps in the model are:

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Read More From Toughnickel

  1. Describe the situation in detail
  2. Frame the "right" problem
  3. Describe the end-state goals from a broad perspective of values
  4. Identify the alternatives
  5. Evaluate the alternatives
  6. Identify and assess the risks
  7. Make the decision
  8. Develop and implement the solution
  9. Evaluate the results

11. Government Regulatory Measures

The final reason for business success or failure is how much the owners of an enterprise have a good grasp of the rules and regulations governing their sector of the economy; this includes having a clear understanding of the tax structure. Many would-be entrepreneurs charge into a good idea, not knowing what restrictions apply to the execution of the idea.

For instance, a businessperson may take a vacation in Southeast Asia, go shopping in a local bazaar, and think that he can make a huge profit importing garments and handicrafts. Accordingly, he may purchase 1000 shoulder bags for $3000, thinking he can surely sell them for $10 a bag back home. However, before throwing down his cash, he did not realize he would have to pay a duty of $3 a bag to export them from the foreign country; another tariff to import them into his home country; not to mention taxes on the income. Not knowing the extent of government interference in an industry can mean the difference between the success and failure of a business.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.


Modou sowe on June 27, 2020:

Am very much Happy for the explation am a college student training to be a business management teacher thanks a lot sir.

Emma on April 03, 2018:

I think hard work is also necessary. Otherwise its awesome.

ecoggins (author) from Corona, California on August 07, 2014:

Thank you jeetendra for your wonderful feedback. You are right to point out that the article would be stronger with good examples. I appreciate your comments very much.

jeetendra shrestha(nepal) on August 05, 2014:

i found impressive definitions about the topic success and failure of business.the points that you have defined are practical definitions and applicable in the current situation of world.i feel something would be better to mention suitable and real examples in it.thank you for providing such impressive article.i am eger to know more about this topic.if it is possible then i will be waiting for other articles in my email.

ecoggins (author) from Corona, California on June 15, 2012:

Martin and FSlovenec, Thank you for your positive input. I appreciate it very much.

Martin, attention to detail is indeed important, thank you for that insight. You can count the 11th point as an add bonus for no extra charge.

FSlovenec, you are right when you say well-planned practice makes perfect. It is important to do the things that relate specifically to the task or objectives of the organization and say no to good but unnecessary practices. This relates to Jim Collins' hedge hog concept which he highlighted in the best seller Good to Great.

Thank you both for your helpful insights and encouraging words.

Frank Slovenec from San Francisco, CA on June 14, 2012:

All good..I would add action and constantly creating momentum..the ten are good when effectively applied..Practice does not make perfect but well planned practice makes have the planning part down. Thanks

Martin Peterson on June 12, 2012:

Attention to detail is also very important, which is why I'm surprised you have 11 reasons and your title is '10 reasons for business success or failure'.

Mahaveer Sanglikar from Pune, India on April 27, 2012:

Well written and useful Hub, thank you for sharing the information. Voted up.

Omeone in Thailand on March 08, 2012:

I think the key factor is "Intellectual capital management".

ecoggins (author) from Corona, California on March 07, 2012:

Charlane, thank you for the encouraging feedback. I am very happy this hub was a help to you.

charlane on March 07, 2012:

thank you so much hub!.... I got alot of info for I was doing an assignment for school purposses!.... Im realy greatful:-)

dannyjames on December 20, 2011:

Mayor Bloomberg has been nominated as Legend of the Month on Legendary Moves:

ecoggins (author) from Corona, California on November 29, 2011:

KBEvolve, Thank you for your enocuraging comments. I appreciate them and hope all the best to you.

Kenneth Brown from United States on November 29, 2011:

I learned a lot from this article. It was a clear and concise list of strong concepts for achieving success.

Amit on November 08, 2011:

Thanks a lot, Nice Hub

ecoggins (author) from Corona, California on November 02, 2011:

Modeinkcheery, Thank you for sharing your comment. innovation is another key to business success or failure, isn't it? The ability to devise new products and services that meet the demnads of consumers will allow an enterprise to maintain a strategic competitive advantage.

Modelnkcheery on November 02, 2011:

The powerful key to bussiness decision is innovation.

akiiki hak on September 27, 2011:

im atually going to get afirst class degree because of this lovely work

ecoggins (author) from Corona, California on March 13, 2011:

ahostagesituation, that you for sharing with me. I am glad that you found this hub was helpful to you. I wish all the best to you in everything.

The Lion Queen on March 11, 2011:

I like this hub. When I pointed out my ineptitude at certain aspects of my business, my quasi-spouse-advisor-man pointed out that I don't have to shoot a gun to lead an army. Your points on empowering leadership and well-defined vision stand out to me. If at least the concept of leadership can be inspired in those who don't naturally have it then it's less work for the person making decisions for the company. I want to empower leadership.

Zain on February 15, 2011:

Good work done but nevertheless still a lot of things missing like examples citation to justify each steps given above.

ecoggins (author) from Corona, California on January 05, 2011:

ebrahim, thank you for your encouraging comments. I will check out your link.

ebrahim3enab on January 05, 2011:

very good article , thank you very much

you can check this link also : )

whit my best wishes

ecoggins (author) from Corona, California on December 15, 2010:

Mr G Bverkerwa, I appreciate your enocuragement and am very glad that you found this hub useful. All the best to you in everything.

Mr G Bvekerwa on December 15, 2010:

i have learnt a lot from your hub/article. keep on e good work.u are ment to be e leader of our companies through the net.

ecoggins (author) from Corona, California on November 10, 2010:

Mr. Fisherman, I'm happy you found it helpful. All the best to you.

Mr. Fisherman on November 10, 2010:

Informative. Thanks for sharing. :)

ecoggins (author) from Corona, California on November 08, 2010:

KenWu, thanks again.

KenWu from Malaysia on November 07, 2010:

Precisely written and it all rooted back to entrepreneurship and leadership skills.

ecoggins (author) from Corona, California on October 20, 2010:

thanks Bridget for your insights. good solid partners and dependable employees are an important part of whether a business is a successful or failure. Sounds like you have a great business going. I appreciate your enocuragement.

Bridget Davidson on October 20, 2010:

You also need partners you can trust and employees you can depend on. Here at GlobalTranz we have the best of both worlds, including all of our successful freight agents. You were right on with this hub!

ecoggins (author) from Corona, California on September 28, 2010:

dear sharon, thank you for your encouragement. I am delighted you find my hubs helpful.

sharon e dix on September 28, 2010:

Once again , you truly shine as a leader in a world of no directions. Thank you , for all the time you spend directing lives.May all your dreams come. Sharon e Dix

ecoggins (author) from Corona, California on August 16, 2010:

Roni2010 I hope you do too. Thank you for the kind comment.

ecoggins (author) from Corona, California on August 03, 2010:


Thank you for your emcouraging comment. You are right innovation is a very important key to business success and failure. Thank you for sharing that insight.

jibi1234 from New York on August 03, 2010:

Good Article..But one of the key to success in today's world is INNOVATION :-)

ecoggins (author) from Corona, California on May 03, 2010:

workingbase, thank you for that suggestion. Internet strategy can play an important role in business today.

workingbase on May 03, 2010:

Nowadays behind a good business, internet strategy can play an important role.

deliver-project on March 23, 2010:

You have outlined it very well ecoggins. I am managing my own business and yes, i've experienced lots of failures and success. From you hub i learned a lot from it..thanks for sharing..

kavita pandey on March 15, 2010:

great article, was realy helpful for my business management studies

ecoggins (author) from Corona, California on January 12, 2010:

Frank, thank you for your kind comments I appreciate them very much.

Frank Crandell on January 11, 2010:

Business start up can be overwhelming for sure. Nice list of reasons to keep in mind. Wishing you great success.

sabbatha1 from on October 30, 2009:

I am just starting up a business your hub was fantastic. Thanks for the great information. I am just putting my business plan together with help from the small business administration.

bryana on October 06, 2009:

this is not what i was looking for but thanks for the info

ecoggins (author) from Corona, California on August 21, 2009:

DeBorrah, Thank you again for your gracious comments.

Elder DeBorrah K Ogans on August 21, 2009:

There is some very helpful information in this hub!

I am all for empowering people. Transformation leadership is the way to go!

Rebecca E. from Canada on August 15, 2009:

This article proves to me that there are many ways to develop leaders. Thanks for sharing.

ecoggins (author) from Corona, California on August 09, 2009:

jbullet, thank you for your comment. Yeah...a leader who recognizes and acknowledges the contribution of their employees energizes and motivates them to achieve even greater things.

jbullet on August 09, 2009:

I'm a bit fan of empowering leadership. I love seeing other people grow and develop themselves and try to give people the room to do that as much as I can.

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