'Small businesses fail because owners don't plan ahead'. Is this statement true?
‘Small businesses fail because owners don’t plan ahead’. Is this statement true? In order to answer this question the above statement must be broken up and a few of the words must be examined. It is important to fully understand what constitutes failure in a small business and if more efficient planning could have prevented this failure.
When studying about small business failures, one must understand that there is in fact a difference between a business failing and a business going out of business or cease trading. Statistics state that “one in three small firms go out of business during the first twelve months”. This statement is not a strong one when other statements show that “one small business in three fails in the first three years.” How can two statements such as the two above be so different when it seems like they are both concentrating on the same subject? The answer to this question is simply because one of the statements is concerning ‘going out of business’ and the other is dealing with a business failing. Therefore there is a difference between ‘failing’ and ‘going out of business’. The second statistic above can be used when considering failure in a small business as is needed in the topical statement of this essay.
Many people assume that the main purpose of a small business can only be achieved if the company still trades and is not terminated. That is the same as saying that a business closing or one which cannot continue to exist has failed. Failure cannot be described like this as sometimes businesses are terminated but they are still deemed successful by their owners. An example of this is when a businessman sells his business. After it is sold the new owner may close it down and use it solely for the reason that it had factories which could be useful to the new owners other business. In this case the closure of the previous owners business does not mean that his business has failed. If the businessman’s objective was to make a profit and he sold the business for a profit then the business has succeeded even though the business has closed down. Another example which helps explain this point is in the case of a man who is just trying to make enough money in order to retire. This kind of businessman is not trying to make a fortune and therefore his business cannot be considered a failure when it closes down. It must actually be seen as a success as the closure of the business indicates that the man has enough money to retire and the person has therefore reached his aim. These two cases show that failure in a business can be described as a business that does not reach the aims or objectives of its owner. However in the business world today there are many businesses and a great majority of these business owner’s aims are to make as much money as possible and termination or ceasing to trade to these owners is considered failing. For the purpose of this essay failure still occurs when an owners aims are not met but it must be stated that probably in most cases owners aims are to maximize profit and therefore in this essay failure is when an owners business does not make their expected profit. Then it must be said that in the majority of cases the termination or closure of a business normally leads to its failure.
