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The top two reasons businesses go bankrupt and how to avoid them

It’s been said that there are really only two reasons why businesses go bankrupt: ineffective management and ineffective leadership. If you’re a business owner, chances are that you’ve experienced at least one of these two scenarios and know first-hand how damaging they can be to your bottom line, your staff, and your customers.

Here are the top five reasons why businesses go Bankrupt, with tips on how to avoid these common pitfalls and succeed in your business endeavors…

Do you have someone who motivates you?

It’s important for business owners to have mentors. Mentors provide insight, support, advice, resources—all kinds of help. When you do find a good mentor, don’t be afraid to reach out and ask for advice or guidance.

Even if your mentor can’t give you specific advice about your business challenges, having someone with experience will put you in better stead than going it alone.

For example, there may be a number of challenges that every new business owner faces—such as marketing problems or challenges dealing with different employees—that your mentor might know firsthand how to deal with (or at least point you in a direction that would get you on track).


Are you using your strengths? [Businesses go Bankrupt]

According to Marcus Buckingham, each person possesses a set of 16 signature strengths—one for each letter of the alphabet. While there are many leadership traits you can learn from books or mentors, your greatest successes will come from fully understanding your own strengths, as well as those of your team members.

Ask yourself: Are we maximizing our strengths?
Do I have enough knowledge about my employees’ strengths?
Are my weaknesses hampering me from leading effectively?
If so, what can I do about it?

Are you always learning?

The entrepreneurial lifestyle is a fluid one. Your business may look very different than it did yesterday at any given time. To keep up with ever-changing trends, it’s important that you’re always learning something new.

Whether you join a mentorship program or read up on industry trade publications, finding ways to enrich your skills will help make you a better leader in both your personal and professional life. Are you open to changing?

If so, then ask yourself these questions: what do I not know? And where can I improve? In order for growth opportunities to present themselves—even in times of intense pressure—it’s important that you maintain an open mindset about learning new things. Be inquisitive; don’t be afraid of change.


Are you building a diverse team?

The importance of diversity has been drilled into our heads for decades, but that doesn’t mean it’s easy. In fact, leaders often struggle with a lack of diversity when putting together their teams—sometimes unconsciously, sometimes not.

To ensure you’re building a diverse team, consider evaluating your new hire candidates according to multiple aspects of diversity; geographic background, industry experience, education level (or degree), gender identity, and sexual orientation are just a few.


A diverse team is one that can see additional perspectives in making decisions which ultimately will improve leadership skills.

Are you working on growth projects?

According to a study by PwC, almost 75% of small-business owners polled have little or no understanding of what growth really means. It’s time for that to change. Growth is an important factor in business success, and it shouldn’t be taken lightly. Here are four things your business should be doing if you want it to grow

Do you measure success?

To ensure long-term success, you must know what your priorities are and make sure your team is working on them. That’s where metrics come in. Every business has a unique set of indicators they use to measure success.

If you can’t tell me exactly why something is important, then I have no way of knowing if it will bring value to my company. To execute properly, every employee should know their role within an organization and be able to identify which metrics indicate performance above expectations, as well as areas for improvement.

Only with that knowledge can we recognize success when we see it.

Have you built up cash reserves over time?

When was the last time you took a look at your company’s cash reserves? Do you have enough capital in your bank account that would allow you to last at least three months even if all of your customers canceled their contracts today?

Many businesses go Bankrupt and never take a good hard look at their cash flow. When business is great, it’s easy to forget about planning for tough times. Your primary purpose as a leader should be building up cash reserves over time so that when times are tough, you’ll have enough money on hand to help prevent businesses go bankrupt.

Once you start keeping an eye on cash flow, it might surprise you just how many ways there are for spending money. see how online pharmacy manages cash.


Do you manage your finances well?

While it’s important to understand your financial health, there’s a lot of flexibility in what you do with your money. What you do with your finances depends on a range of factors like purpose, risk tolerance, and availability.

Taking control of your finances starts with an honest assessment of where you are today – which might include evaluating how much debt you’re carrying or whether you have savings for unexpected expenses.

Once you have clarity about your current state, start working towards one (or more) financial goals.


Have you engaged inconsistent marketing efforts?

The most important factor in a business’s success is consistent marketing. It’s understandable that when you start a business, it might seem like you should focus all your attention on making a product people want.

But do not neglect marketing—your products will not sell themselves, no matter how good they are. With great marketing comes great growth opportunities for your company!


Can other people run your business effectively while you’re away?

Every business requires at least some level of investment, but that doesn’t mean you have to run it yourself. It’s important to have an honest discussion with yourself (and perhaps with your staff) about whether or not you are replaceable in your businesses go Bankrupt.

If there is a chance that you might go out of town or need help, now is a good time to figure out how you will get what you need from someone else. You don’t want your clients or customers wondering why something went wrong if you were unavailable for a short period of time.



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