IGCSE, A Level Business Student Forum

Q28 Analyse the reasons, why business start-ups are in greater risk of failure. [6]

Possible Structure:
[KN]
[AN]
[AN+]

[KN]
[AN]
[AN+]

[KN ] Lack of Experience.
[AN] Many entrepreneurs lack prior experience in running a business. They might have a great idea but may not know how to manage finances, marketing, or handle day-to-day operational challenges effectively.
[AN+] This lack of experience puts them at high chances to fail the start-up.

[KN] Market Uncertainty.
[AN] New businesses may not have a clear understanding of their target market and customer preferences.
[AN+] This can lead to product or service offerings that do not align with actual demand.

[KN] lack of experience
[AN] Many start-up founders lack the experience and knowledge required to run a successful business.
[AN+] They may be experts in their field but may not have the necessary business acumen to navigate complex issues like finance, marketing, and operations.

[KN] limited resources
[AN] Start-ups typically have limited financial resources and may struggle to secure funding.
[AN+] This can impede their ability to invest in product development, marketing, and other critical areas.

KN: Lack of Experience
AN: Many entrepreneurs, especially first-time business owners, lack experience in running a company
AN+: which can lead to poor decision-making and strategic errors.
KN: Marketing and Sales Challenges
AN: Start-ups may struggle with marketing their products or services effectively
AN+: resulting in slow customer acquisition and revenue generation

[KN]Limited Resources and Capital
[AN]Start-ups typically have limited financial resources and capital, which can restrict their ability to invest in critical areas like marketing, research, development, and hiring skilled personnel.
[AN+]This financial constraint can lead to difficulties in scaling the business and gaining traction in the market.

[KN]Market Uncertainty and Validation
[AN]Start-ups often enter markets with untested products or services. They may face uncertainties regarding customer demand, competition, and the viability of their business model.
[AN+]This uncertainty can make it challenging for start-ups to accurately predict and respond to market dynamics, potentially leading to missteps.

[KN] Lack of experience and expertise
[AN] Many startups are launched by enthusiastic entrepreneurs with innovative ideas but limited experience in running a business.
[AN+] Inexperience can lead to poor decision-making, inadequate financial management, and insufficient market knowledge.

[KN] Limited financial resources
[AN] Startups often have limited access to financial resources compared to established businesses.
[AN+] They might face challenges in securing funding, which can hinder their ability to invest in critical areas such as marketing, product development, and talent acquisition.

(Kn) less likely to attain loans(an) a new business, since it has just started will not have enough collateral to get a loan(an+) since it wont have enough to save itself in its times of cash requirements it wont be able to go on especially in the initial stage when cash is needed the most
(Kn) cash flow problems (an) a business may not have calculated the cash flow properly or didnt even bother calculating it resulting in wrong decision making (An+) this will cause the firms to spend more than the money available causing debts and hence failure

(kn)no experience
(an)entrepreneur usually have unrealistic hope which mostly aren't reached due to lack of experience
(an+)which means that all the money they spent could go to waste
(kn) finance may run out
(an)when a business starts up it needs more money then it will give in the initial state
(an+)and some people might not have it leading to market failure

[KN] Lack of research
[AN] Young entrepreneurs often have the passion to start a business but when it comes to challenges like in which market to set, what would make the product have USP, they fail to respond efficiently. Thus this can be a reason of business failing, just in the very first step.
[AN+] Moreover this can lead to the deterioration of confidence and passion.

[KN] Ineffective business plan.
[AN] As alot of competition is already in the market so any business specially new with a bad business plan is bound to fail as no attractive pole will be set up to attract potential customers.
[AN+] Thus this can lead to no brand visibility and throwing the money invested into the dustbin.

[kn] lack of research
[an] such entrepreneurs have unrealistic expectations as they started the business as more of a passion
[an+] therefore when it comes to challenges they fail to respond efficiently
[kn] ineffective business plan
[an] since there is already high competition entering the market as a unplanned business
[an+] it will make them bound to fail as they wont be able to attract any customer with such business plans leading to no brand visibility.

[kn] poor marketing
[an] the business may not have the right resources on how to advertise their products
[an+] no brand iage created and few customers as the businesses name is unknown the market leading to possibility for failure

[kn] not enough capital
[an] start ups may underestimate the amount of expenses needed to run a business
[an+] leading to them having to close down the business as some banks do not provide loans for start up businesses

[KN] lack of experience by the starter
[AN] when a person is starting up an new business they would have almost no experience about owning an business
[AN+] Due to this fear many people don't start their own business

[KN] lack of market research
[AN] many business may be started without any market research
[AN+] Resulting in highest risk of failure

[Kn] Lack of management skills
[An] This is a common cause a new business failes as because of lack of experience firms may make bad decisions such as locating business where demand is low and cost is high
[An+]thus this can lead to

[Kn]poor financial management
[An] shortage of cash can be the main cause of failure as when business donot calculate its expenses
[An+] Thus this will cause the firms to spend more than the money available causing debts and hence failure

[KN] Lack of planning
[AN] New businesses are unable to plan and allocate resources according to market trends.Therefore, they may not be able to attract more customers
[an] hence leading to loss of sales


[KN]Lack of working capital
[AN]Due to less knowledge, new businesses may invest all of their money and may not keep any for working capital
[AN] this can reduce liquidity and may lead to insolvency

[KN]Lack of capital/funds
[AN]New businesses may not have enough capital to buy new machinery and increase productivity
[AN+]Thus due unavailability of such machinery, efficiency of the business is reduced

[KN]Lack of proper managemnet
[AN]A new business may not have proper managers or people that plan business future
[AN+]This may lead to bad financial management which may send a business towards decline