{"id":24223,"date":"2023-07-14T14:31:30","date_gmt":"2023-07-14T19:31:30","guid":{"rendered":"https:\/\/mascolombia.com\/why-do-companies-go-bankrupt\/"},"modified":"2023-07-14T14:31:31","modified_gmt":"2023-07-14T19:31:31","slug":"why-do-companies-go-bankrupt","status":"publish","type":"post","link":"https:\/\/mascolombia.com\/en\/why-do-companies-go-bankrupt\/","title":{"rendered":"Why do companies go bankrupt?"},"content":{"rendered":"\n

Statistics and common sense tell us that a company can go bankrupt at any time. In most cases, lack of money is the most common cause. If you have a business or are about to start one, the first mantra you should repeat and the main value you should instill in your company\u2019s culture is: Sell, sell, sell!<\/strong><\/p>\n\n

I will group business failures into three categories, related to the maturity and size of the company. The first group of risks mainly affects young or small companies. The second group covers risks that typically lead to bankruptcy for medium-sized or expanding companies, which have already reached a certain level of consolidation. The third group of risks, known as \u201cblack swans\u201d, can ruin larger companies, even countries or empires.<\/p>\n\n

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The risks that threaten small companies or startups<\/em> are the most significant, approximately 80% of them fail in the first 5 years.<\/p>\n\n

Depending on the country, the mortality rate of small and medium-sized enterprises (SMEs) in the first 2 years varies from 30% in the United States (Samuelson and Nordhaus) to 93% in Argentina (Asopyme from Argentina).<\/p>\n\n

In our country, according to data from the Economic Commission for Latin America and the Caribbean – ECLAC, approximately 67% of companies cease to exist before 3 years (2 out of 3!).<\/p>\n\n

The main risk is simple: companies that do not sell enough are abandoned by their founders, who look for more lucrative opportunities or simply seek employment for stability and security. But why would a company not sell enough?<\/p>\n\n

The first reason is the lack of execution of the strategy, either by the absence of the strategy, lack of processes derived from the strategy or lack of execution of the activities derived from the strategy. In this scenario, the company dies of inaction.<\/p>\n\n

The second reason is lack of organization. This risk leads to unclear money management, rapid depletion of inventory, preferences or uncertainty among employees, conflicts between partners over the use of resources, loss of trust and the withering away of the vision and passion with which the project was started. Eventually, sales take a back seat and this kills the company.<\/p>\n\n

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The third risk that bankrupts SMEs by preventing them from focusing on the production and sale of their product is the lack of a strong corporate culture.<\/p>\n\n

Without a corporate culture, staff turnover is higher, there is less internal talent to execute strategy, decision making is slow and volatile and, when the company is very small, the corporate culture changes with the mood of the owner, adding uncertainty to the company\u2019s sales and revenues.<\/p>\n\n

In summary, the solution to these threats can be summed up in one sentence: focus on sales. You should always look to sell more than you buy, look for more income than expenses.<\/p>\n\n

Keep control of money and, if you can only take care of one thing in the midst of all the daily concerns, do it by monitoring and controlling the company\u2019s cash flows, so you will know if you are selling enough or if you should sell more.<\/p>\n\n

Instill in all your collaborators the objective of selling, the discipline of selling and the culture of selling. Get sales training, take online courses, listen to podcasts and videos when possible, read about sales in your spare time, invite successful sales people to lunch and ask them for advice, invest in your own sales education and promote continuing education in your sales team.<\/p>\n\n

Share with your employees the status and sales goals of the company and establish real-time sales tracking as one of the first measures in your company. In this way, I can assure you that in 2, 3 or 5 years, your company will be ready for the next step: consolidate as a medium-sized company.<\/p>\n\n

If you have a young company, focus on mitigating the risks listed above and your chances of surviving to the next phase of your business life will multiply!<\/p>\n\n

Note: This article was proofread by ChatGPT.<\/p>\n\n

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