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The 6 Stages of Business Failure

Most people who start a business are interested in turning their dreams into reality. While every business owner encounters both good and bad times along the way, there are six stages of decline that separates exceptional businesses from those that are struggling or failing. The six stages of failure are:


When a business owner is planning for the future, they often contemplate their success. You may envision achieving financial freedom, building a large, technologically advanced company, or working exciting partners. In addition to these visions, though, they often discuss losing the control of their business or failing in a specific area. When these thoughts arise in your mind, your default mode of thought is to deny the possibility that you may be unable to achieve the business success that you desire.


Once a business owner reaches the point where they recognize that their efforts to achieve business success may ultimately fail, they will begin to accept that their dream is simply not possible without sufficient cashflow, resources or capital. Instead of engaging in a series of activities or solutions, they simply accept that the task before him is impossible. You may ask yourself questions such as "Is there really anything I can do to make this dream become a reality? or should I just give up?"


Once a business failure is recognized, a series of changes usually occurs within the company or organization. In most cases, change is necessary in order to effectively manage change or to ensure optimal performance. When a company fails to address problems, failure may soon follow. In order to prevent this from happening, the company must effectively adapt to new circumstances, especially when the task in front of them is more complex than they originally perceived.


Once a company acknowledges that it is operating in a state of failure, opportunities to improve and grow are often open. Unfortunately, most companies do not take advantage of these opportunities. They instead choose to simply "win" against their competition and move on to the next opportunity. For any business, this is the worst possible outcome. If a business wants to avoid being left in the dust during a competition, it needs to work towards improving its standing prior to competition.


Once a company has reached the discovery stage, its goal is to identify new areas of opportunity and apply those to their operations. This means addressing issues and weaknesses as they arise, as well as identifying new skills and technologies to implement as soon as possible. As a company continues to progress through each stage, it can build on its strengths and remain viable while meeting competition's advances.


At this stage, a company is able to establish appropriate internal controls to assure that objectives, goals, and procedures are closely aligned with organizational values and goals. This ensures that objectives received are accurate and can be implemented in an effective and efficient manner. Internal controls may include controls related to financial reporting, internal controls related to inventory management, and internal controls related to ordering and pricing. While every company is different, internal control systems can greatly reduce the risks to the company's assets, finances, and results.

When a company completes this first stage, it is successful in bringing in new customers, building sales for existing customers, generating new product lines, and building a foundation for future growth. However, a company cannot move forward until it encounters its failure. In failure, a company faces the threat of irrelevancy, which can result in loss of market share, decreasing profits, or company shutters. Failure, if left unchecked, can also lead to company bankruptcy. As such, it is important for organizations to recognize these key stages of failure and seek ways to mitigate their negative effects before they happen.

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About Adella Pasos

This Entrepreneur and Marketing Expert has shared her passion for growing brands from the ground up. She’s worked with Startups, Small Businesses, Fortune 500 Corporations and Entertainment Talent to help them recognize the value of marketing, and give her clients the ability to access their niche market via online, social media, mobile, merchandising, and events.

She hosts the What's Your Game Plan TV show features: Free Expert Advice, and Growth strategies for Business Owners Across the Globe. Access thousands of FREE Tips, Trends & Tools to Move Your Business Forward!


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