The Real Reason Businesses Fail

"We're forced to close because the bank will not loan us the money we need." Phrases like this have been heard too many times the last several years, and yes, it's unfortunate, but here's my perspective: Companies don't fail due to a lack of financial capital. They fail due to a lack of intellectual capital.


Let me explain why. Any business is in business to satisfy customer needs. If things work out correctly, they can fill those needs at a value for which customers are willing to pay and at an amount that is more than the company has to spend to prepare the item for sale. It's that simple – nothing complex, nothing behind the magic curtain. Just sell something for more than it costs to make it and you're fine. Well, not quite.

We all know there are numerous other factors that can and do come into play with regard to how a business operates, and it's all of these other circumstances that require the proper use of intellectual capital. The level of intellectual capital in any business is going to vary dramatically. More importantly, how the intellectual capital is ultimately used is going to determine the success or failure of a business.




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