What are the reasons for food business failure? 

By November 4, 2021 No Comments
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Unfortunately being good at what you do is often not enough.  

The secret is not just knowing how to cook, but knowing how to make money from cooking.  

All too often the people who have failed in business have failed because they did not recognise this very important difference.


Ingredient 1: Business Law


What are the reasons for food business failure?


While there is no single magical formula for success in a food business, knowing the basics and doing them well maximises the chances of survival. The prime reason for business failure has been identified as:

Poor Planning

‘Failing to plan is planning to fail’ is an old adage which describes the major reason for business failure.  Careful and wise planning can dramatically reduce the chances of failure.  Having a positive mental attitude and setting goals is a key part of planning which is a major factor in business success.

Other reasons for business failure are:

Lack of capital

Due to underestimates of the real costs of starting a business and little consideration of the fact that there maybe a non-income-earning time at the commencement of the business.

Partnership problems

Choose partners carefully on the basis of their ability to contribute effectively to the business, not just because they may be a friend.  Chances are they won’t stay a friend!

Lack of management expertise

Setting goals, organising, administration, planning, delegating and budgeting are all abilities required for effective management.

Poor record keeping

It is essential to keep accurate and appropriate records for your business.  They will help you to monitor the progress of your business and to comply with government laws.

Incorrect pricing structure

Sometimes businesses underprice themselves and do not take into account the actual costs of producing their products.  There are many ways to price a product other than it being the cheapest;  look carefully at them.  Pricing involves maintaining a competitive price for your product, but not necessarily the cheapest price;  after all, you want to make a profit from what you do.

Lack of cash flow

Strong liquidity should be maintained by using budgets, monitoring profits, controlling credit sales, carefully managing inventory levels and maintaining overhead costs.

Marketing problems

Marketing is one of the most important areas of business.  If you don’t have customers, you don’t have a business!  Staying aware of what is happening in the marketplace is critical for the survival of a business.  Try and find an opening with as many customers and as few competitors as possible. 

Failure to seek advice

Many people do not seek advice until it is too late.  Professional assistance is an investment in your business and may prevent disaster at a later stage.  A great deal of technical, business and management support is now available from professional advisers.

Lack of experience

Experience is not the only way to learn, but it is still the best teacher. 

By understanding the reasons for food business failure, you can look at ways of avoiding the pitfalls for your business.

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