Managing a business effectively is about organisation, focus and process as a massive 55% of businesses don’t make it to their fifth birthday. The commentators offer banal opinions as to why this happens. I continuosly observe three key reasons why this tragedy happens so often and to so many individuals with different experience, education and knowledge.

The primary reason is lack of market comprehension.

No foresight. For example People have the concept, build the product and then expect the market to come and purchase. In this connected age there is no excuse for lack of research prior to spending any time and cash on designing a product until you have solid evidence there is a market.

The second reason is lack of understanding of fundamental facts about business.

The majority of folks starting a business know their trade, how to deliver a service or make a product, but not how to run a business.  Having the ability to understand and follow the balances in the Income statement or the balance sheet is a vital. The basic knowledge of accounting is not very often imparted coherently by the business manuals, online resources and those with the knowledge such as accountants and bookkeepers. The problem is worsened by greedy and short sighted vendors such as Sage software misleading the market by selling only a portion of the functionality actually needed by small businesses.

Sage software and other vendors as usual are underserving small businesses.

Large enterprises way back worked out that all of their Information systems should be fused together to give them a comprehensive view of the business and then along came ERP software solutions and packages. One vendor NetSuite had the foresight to see the gap in the market and began selling its small business ERP software. NetSuite competitors have seen the gap as well and as a result cheaper easier to use systems have emerged.

The third reason companies don’t make it is a because of the absence of well thought through management processes and policies to enable a sustainable fabric of disciplines and behaviours.