ERP, small businesses and why they fail
Businesses need effective process, the focus of leadership and structure that can adapt to enable the company to grow safely as a massive 55% of businesses fail in their first five years of existence. The experts offer shallow explanations as to why this occurs. I consistently see three key reasons why this tragedy happens so often and to so many people with different experience, education and knowledge.
The primary reason is insufficient market understanding.
No foresight. For example Individuals have the concept, build the product and then sit back and wait for the market to appear and buy. In this connected age there is no excuse for lack of investigation before wasting any time and money on creating a product until you have solid evidence there is a market.
The number two reason is lack of understanding of fundamental facts about business.
The majority of folks starting a business know their trade, how to offer a service or build a product, but not how to run a business. Being able to understand and follow the balances in the P&L or the balance sheet is a vital. The basic knowledge of accounting is rarely imparted well by the business books, internet resources and experts in the know such as accountants and bookkeepers. This problem is further exacerbated by software companies and their partners pushing small business accounting software at fledgling businesses.
Sage software and other vendors as usual are underserving small businesses.
Until recently ERP software solutions and packages were the privilege of larger enterprises who had deduced that the back and front office systems need to be joined together to give a complete picture of the business. One software developer NetSuite had the foresight to see the gap in the market and started selling its small business ERP software. NetSuite pricing has since increased and put their solution out of the economic reach of small businesses.
The third reason companies don’t make it is a because of the lack of practical management processes and policies to enable a sustainable fabric of disciplines and behaviours.
Filed under Legal by .