Business Failure

Question 1

External

Answer 1

No demand for business idea 
Poorly executed idea
Economic change 
Legal & social change 
Loss of important/ major customer 
Sudden decline in market demand 
Change in legislation impacting demand or increasing costs

Question 2

Internal

Answer 2

• Lack of management control - failure to develop credible business plan/ failure to administer business properly
• Inadequate or inappropriate financing - use of short term overdrafts for long term investment or capital spending/ failure to use debt factoring when sales increase
• Poor management of cash flow - significant increase in stock levels / bad debt incurred / inaccurate forecasting by management / failure to plan for significant capital and:or exceptional expenditure