5 common causes of business bankruptcy

Running a business is not easy or straightforward. You constantly need to adapt to changes and figure out how to grow. Unfortunately, not all companies succeed. You may find yourself among the many businesses that go bankrupt.

According to Business Insider, business bankruptcies are on the rise. There are so many reasons why you may find yourself considering bankruptcy for your company. Here are some top factors that lead to businesses declaring bankruptcy.

1. Poor market conditions

The specific market and overall economy both play major roles in the success of your organization. If you are in a niche market, you may encounter struggles due to shifts in customer preferences. A lull or recession in the overall economic climate can cause a decrease in consumer spending and confidence, which may result in significant revenue loss. 

2. Too much competition

Even if you have a great business idea, it may not come to fruition in a competitive market. In a highly competitive arena, established competitors can easily rule the playing field and keep new ventures from succeeding. 

3. Financing problems

One of the main challenges of running a small business is effectively financing it. You may need to take out loans to fund your operations. But if your company struggles, your lender may not give you more funding. Even if you can secure financing, you may struggle to pay interest on the debt you accrue from loans. 

4. Poor internal conditions

You can have a winning business idea with enough funding in a viable market and still fail if your internal operations are not viable. Client loss, partnership disputes and poor decision-making can play major roles in the downfall of a business. 

5. Accidents, crime and legal troubles

Sometimes, the failure of a business is completely out of your control. A natural disaster, hacking and fraud may all derail your company from running properly. Customers, partners or competitors may also file lawsuits against your company.

No Comments

Leave a comment
Comment Information

Prescott Pearson & Tande, PA
443 Old Highway 8 Northwest, Suite 208
New Brighton, MN 55112

Toll Free: 888-366-0827
Phone: 651-968-8096
Fax: 651-633-7562
New Brighton Law Office Map

map