What is the Cause of a Business Failure?

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I often wonder what went wrong when I hear “business failure” used to define a closed company. In my line of work, I’m always especially dismayed to discover that a favourite business has closed without warning. It has happened several times recently. I was pondering this when seeing a “Closed for Business” sign at a favourite garden supply firm. I’d been looking forward to chatting with Fred, the cheerful owner, prior to buying plants and materials for the spring season.

I recently heard someone say, “There are no business failures – only people failures”. That judgment sounds harsh. Often true perhaps, but not always. For Fred, the garden supply firm owner, he has not made the changes needed to posper. Last year was certainly a challenge for independent operators. Spring was so hot that supplies went unsold. Sales were way below average. People stayed away, rather than melt in his uncovered sales space. Or they bought their supplies at lower cost within the relative comfort of the big box store’s covered space. Fred’s fixed costs stayed the same, while sales dwindled and unsold perishables spoiled.

Fred had so much personality and knowledge. He never capitalized on this with an effective web or social media presence. He made no attempt to build an on-line base of interested gardener customers and provide continuing value. As a loyal customer, I never knew what specials he was running. I’m forever missing ideal planting dates for the various types of flowers and vegetables that we grow. Constant contact and information from Fred would have been welcome. And I, for one, would have spent a lot more money at his business had he made the effort to keep in touch.

Customer service declined in the last few years, simply by the way in which the hired assistants dealt with potential buyers. Ironically, the folks at the local big box stores tend to be friendlier and more helpful than the staffers that Fred brought in for the season. This, again, took a toll on sales.

Was Fred’s business demise a personal failure? It may seem so, but I really don’t know, because I have not spoken with him and don’t have the facts at my disposal.  Maybe he had health problems that crimped his ability to function.  No failure there.  Perhaps he made heroic attempts to soldier on.

I do know, with some certainty, that Fred’s company’s net revenues in the past few years would have increased had he taken these simple, cost-free measures to promote and maintain his company. That’s sad for him, because he would have been better for it today. And sad for so many of his customers, who have lost a favourite and convenient place to buy their gardening supplies.

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