Why do companies fail to do well in business? There are many reasons, but here let me give you my observations:
1. Making a product which NOBODY wants: the management will tell you we were overpriced, we were too early for our times, we did not have the right channel, etc. etc. but largely if they make a stupid product, it cannot sell.
2. No clue about pricing, costing, or cash flow: this requires and deserves a separate post, and I promise to do so quickly. I have seen 3 companies very closely – and all 3 of them had this problem.
3. Too MUCH MONEY: a start up that raises too much money is in as much danger of developing bad money habits. Thus not having money is surely a problem, but having too much money and not knowing what to do with it is a BIGGER problem.
4. Not knowing who is the boss: when a few friends get together and start a company, the CEO is just a friend, and he is unable to act like a CEO. This of course is a VC’s nightmare, but if the company is funded by private businessmen, this mistake does not come out till it is too late.
5. Lack of business experience and hoping to learn on the job.
6. Lack of confidence in own product leading to poor pricing.
7. Wrong HR: Poor recruitment, believing that they cannot get good talent, no training, politics, and poor retention.
8. Not understanding Research, Development, Launching a product, and knowing when to kill / withdraw a product.
9. Top management having no clue about what is happening. Shocked? Found one company where the Board had no clue what was happening in the company. One of the employees said …of course Subra the independent directors open their mouth. How else can they eat the sandwich?
10. As the company gets outside funding, losing focus on the core and doing pathetic capital allocation. Amazing how companies concentrate on the CeO’s pet projects, projects that will get a better P E Ratio in the market, etc. instead of ploughing back into the successful ventures.
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