(a)What are the key reasons for most small-business failures?
Business failure is defined as the closing of a business that results in financial loss for at least one of the business's creditors. An associated term, business dissolution, refers to the formal termination or closure of a business as well, but with dissolution, financial loss (for the business owners or for the business's creditors) is not necessarily a part of the equation.
All entrepreneurs who decide to establish their own business face the possibility of failure, and a good deal of "popular wisdom" holds that failure is not only possible but probable for the small business owner seeking to launch his or her own enterprise (it has long been said that four out of five new businesses fail within five years of their establishment, for instance). But current studies indicate that such gloomy forecasts often present a false picture of entrepreneurial realities. Indeed, many business experts that the majority of small business owners are actually successful with their ventures. "Outright failures of small businesses are in fact remarkably rare," contended Nation's Business, "if failure is defined, reasonably enough, as a business closing that results in losses to creditors because the firm files for bankruptcy or because it simply closes its doors without paying its debts."
Business experts who study the gap between actual rates of business failure and the popular perception of those rates often blame it on a general misunderstanding of the nature of business dissolutions. "The confusion comes in mixing up business failures with business dissolutions," Nation's Business flatly stated. "Lots of small companies go out of business for reasons that probably shouldn't be called 'failure'—the owner may have gotten bored, for instance, may be disappointed with the returns, or may simply want to try a greener pasture. If an entrepreneur closes one business and starts another one that is more successful, that's more reason for celebration than concern." Bruce D. Phillips, a director with the Small Business Administration's office of economic research, even told Nation's Business that studies indicate that there may be four to eight times as many dissolutions as there are outright business failures.
REASONS FOR BUSINESS FAILURE
Nonetheless, thousands of small business ventures do fail every year in America. "Companies stumble for many reasons," observed Clyton Christensen in Across the Board, "among them bureaucracy, arrogance, tired executive blood, poor planning, short-term investment horizons, inadequate skills and resources, and just plain bad luck." These factors—as well as myriad others—can have a debilitating impact on an operation, as many small business surveys will attest. Chief reasons for business failure cited within such surveys include the following:
POOR PLANNING Ultimately, many small businesses fail because of fundamental shortcomings in their business planning. Planning begins with finding the right business and is integral to every aspect of business operations, including selecting a site, deciding on financing, anticipating work force needs, budgeting, and managing company growth. Planning that is grounded in realistic expectations and accurate, current information is an invaluable asset. Conversely, planning that is based on hopes and hearsay can cripple or destroy even a good business idea in fairly short order.
POORLY CONCEIVED EXPANSION "Every business owner wants to grow his or her business, but expanding with no infrastructure in place makes a business ripe for failure," wrote Tonia Shakespeare in Black Enterprise. "You can incur tremendous losses when you expand outside your core market. Not only is the physical aspect of expansion costly but there are different buying habits in different geographical locations. If you venture into an area outside your home turf, you had better prepare by doing a lot of research."
CASH FLOW DIFFICULTIES Poor cash flow kills thousands of small businesses every year. "Most business owners don't realize how much money it takes to run a business," wrote Shakespeare. "Understand what it takes to get a revolving line of credit before you start your business. It's always easier to get money when you don't need it, so don't wait until you're desperate. Develop your business plan using conservative projections and don't be overly optimistic." Shakespeare warned that profitable, fast-growing businesses can also run into cash crunches that can ultimately lead to bankruptcy. "That's why ongoing cash-flow analysis—tracking the money coming in and going out of the business—is a must."
INABILITY TO REIN IN FLAWED BUSINESS STRATEGIES Some business owners simply refuse to admit when they are wrong. Many small businesses can recover from ill-conceived business initiatives if they are recognized and halted before too much damage is done. But all too often, business owners and managers stubbornly stick with strategies that are doomed to failure, rationalizing that the initiative will begin paying off next month or next quarter. And before they know it, their business is gone, dragged down by poor planning and inordinate pride. Writing in Management Today, Robert Heller characterized this tendency thusly: "Top management sets its sights on some grand but imperfectly conceived objective, launches an incompetent plan of action, pours in cash rather than control when the action misfires, and ignores all the adverse evidence until the disaster strikes."
DETERIORATION IN CUSTOMER BASE This can happen for any number of reasons, including poor service, high prices, and new competitors. Making improvements in products/services offered, marketing, inventory, customer service, and work force personnel can all do a great deal to halt deterioration in customer relations.
INATTENTION TO WARNING SIGNS Most small business failures do not come out of the blue. Certainly, business failures that result from catastrophic natural disasters or the sudden death of a key business member can not be anticipated, but most businesses expire as a result of more mundane factors. New customer complaints and surges in returns are often early warning signs of operational problems. Basic financial tools such as balance sheets and financial statements, meanwhile, can be very helpful tools in helping business owners diagnose what is ailing their company. The numbers contained in those documents often provide ample warning of poor cash-flow management, inventory problems, excessive debt, undercapitalization, or untrustworthy customers, but the business owner has to take the time to look (or take the time to hire an accountant to look) or the warning signs may go unheeded until it is too late.(http://www.enotes.com/small-business-encyclopedia/business-failure-dissolution)
(b)The challenges for education agency
Education agency is the professional body that provides consulting and advisory services to clients.The income resourcds for education agencies normally includes commission fees from the schools and the services charge take from the clients.The mainly services offer by education agency regularly are as follows:
- Consulting and advisory services.
- Draw up study scheme.
- Prepare materials and other necessary documents.
- Apply for the school according to the clients' intention.
- Visa interview guide
- Students overseas' arrangement(For example:Airport pick-up,accommodation,etc)
First of all,the key risk for the education agency is how to establish your goodwill and reputation,the reputation and goodwill directly lead the business to be successful or failure.After you set up your goodwill and good reputation,you must to maintain it,because the reputation and goodwill might be harm by any mistakes in your work.As an example of the consultant give the incorrect information to clients,or cheat the clients.The organization will get a bad reputation soon in this way,and the clients would decrease,even lead it to be bankrupt.
The education agency must to be honest for the clients,that is to make sure that every consultants must according the fact to do their job.The education agency can not take the money into the first mission,it need to provide the professional services,to offer clients which is really best for them.But not which is the most profitable.Some education agencies for the most profit,recommend the students to the schools which are disappointing them.These schoos might even not be recognized by the government.This kind of education agencies would got the evil reputation soon that lead it to lost market-share even wind up.
Some other problems of an education agency must face with are followings:
- How to achieve the higher success rate of entrance application and visa application than competitors.
- Identify what is the current demands in your region.
- Methods of attract more clients.
- Competitive strategies.
(c)What are the main financing sources for small business in Malaysia?
The mainly financiing sources for small business in Malaysia are similiar to the world.Normally,entreprenuers gain the capital from their own saving,family,relatives,loan,and capital adventure company,etc.
Early in the business life cycle with no proven market or customers the business will rely on cash from owners,friends and family,other potential sources include suppliers,customers and government grants.After the business have set up and hit the market.The resources will become more and more,such as the resources of profits,partnerships,grants and leasing options.If the business is going well and profitable,the financing resource that from investors and joint ventures would influx in.
Depend on the business' condition,the financing resource may change.But the mainly fianancing sources for small business in Malaysia are:
- Owenrs and their family,relatives.
- Partnerships
- Government grants
- Investors
- Joint ventures
- Suppliers,customers
- Profits
Conclusion
Small businesses play a critical role in the business field,the owners must pay attention on the key reasons for most small-business failures.Decision making,planning and other activities must opon the consideration on them,these key reasons directly decide what the business will going to be.Upon the consideration on these reasons,to open a new business must in the field that you get used to or understand the operation,these conditions are favorable for you to do this business well.The financing resources are the owners have to face with and settle,the ways to gain capital are diverse.But the regulary ways are similiar to any country,it could be gain from owners and their families/relatives,capital adventures,investors,partnerships,etc.
Reference
Dr Grace,(2005),Introduction to entrepreneurship,Malaysia,Binary university college,pg 8,9,10,11,12.
http://www.entrepreneur.com/toolkit[online],06/07/2008
http://www.gov.my/MYGOV/BI/Directory/Business/BusinessByLifeCycle/PlanBusiness/BusinessInMalaysia/[online],06/07/2008
http://en.wikipedia.org/wiki/Business[online],06/07/2008
http://www.enotes.com/small-business-encyclopedia/business-failure-dissolution[online],06/07/2008