Online marketing and e commerce are two new divisions being set up by every organization in a big to get into the bandwagon of Internet based selling. B to B and B to C models have developed significantly over the last few years and are fast replacing traditional modes of business transactions. Online-auction too is one of the important channels that the e commerce has spawned.
You may have been into traditional auction and buying things in the past. Now if you were planning to enter into online e auctions, you would need to understand how this works. Online-auctions are different from traditional auctions. Unless you know these differences you would not be able to decide what is suitable for you.
In an online-auction, one is not able to see or view the merchandise unlike in the traditional auction. If you are purchasing high priced collectibles then this fact does make a difference.
It is quite difficult for anyone to communicate with the sellers in an online auction. Few sites do offer online chat, but still it is inconvenient.
Online auctions do have their benefits. Primary advantage being that the seller does not have to secure or rent a premise to hold the auction and invite buyers to attend.
In case of online-auction the seller stands to save on a lot of expenses besides paying for the hall or the venue. He does not have to pay for looking after the people who attend the auction and can save expenses towards lunch etc.
Online auction is an advantage to the seller in the sense that he need not restrict the participation to any particular location and can invite prospective buyers from anywhere in the world. This gives him access to a wider market.
People who know online auction procedures and technicalities thoroughly are in a position to decide and participate in either of the auctions depending upon case to case.
· R&D
· Operation
· Environmentalism
The first cause of business failures you must watch out for is high debt ratio. If your business is being owed much, maybe by giving too much credit to customers, then your business is at risk. Also, if your business is heavily indebted, then it's at risk of folding up. An antidote to this is for you as an entrepreneur to always carry out an acid test ratio and keep a keen eye on the debt to equity ratio.
"There is one paradoxical characteristic every entrepreneur must possess to succeed. An entrepreneur must be able to persuade his debtors to pay their debts promptly and at the same, must tactically delay payments to his creditors." – Ajaero Tony Martins
The second cause of business failures is high level of mismanagement. If your key staff lacks professionalism, then your business is in trouble. Since your staff are in charge of running the day to day affairs of your business, their professionalism should not be compromised for anything.
"There will be times when you will have to be abrasive, even brutal to members of your staff. Don't worry that your people will say bad things about you because of this. They already have. But in general, try to be pleasant and accommodating. Try to please the greatest number who work for you that you can; antagonize the fewest. Blow smoke." – The Mafia Manager
The third to watch out for is the unexpected resignation of staff from sensitive position. This can really pose a threat to your business so you must be prepared for it. In business, poaching is really a factor to deal with. Big companies are always poaching good employees away from other companies by enticing them with improved salaries and incentives.
"The competition to hire the best will increase in the years ahead. Companies that give extra flexibility to their employees will have the edge in this area." – Bill Gates
Another factor that leads to small business failures is inadequate stock or inventory. I don't need to emphasize much on this because the point is clear. If you have inadequate stock either for production or for your customers, your business is bound for failure. Also; if you stock too much inventory, you are still bound to fail because you are tying down working capital.
"Inventories can be managed but people must be led." – Henry Ross Perot
The fifth cause of business failures is the sales of goods and services below cost price. Sometimes in business, cash crunch, fierce competition or economic factor make businesses sell their goods below cost price and this can ruin your business.
Dwindling working capital also cause of business failures and you must watch out for. Depreciating working capital may be as a result of unnecessary expenditure, too much inventory and weak cash flow management on the part of the entrepreneur.
The seventh factor that could lead to business failure is consistent negative cash flow. Cash flow is to business what blood is to humans. No business can survive without strong cash flow management. A solution to negative cash flow is to hire a professional accountant to keep a keen eye on the cash flow.
"The most important word in the world of money is cash flow. The second most important word is leverage." – Rich Dad
Declining Profit, if not handled properly can cause business failure. If there is a down turn in profit margins due to competition or deflation, your business could be negatively affected. A solution to declining profit is to increase your sales volume so you can make more profit on turnover or better still; diversify.
Loss of market share is the ninth cause of most business failures. If you observe you are losing your market share due to either competition, new technology, innovation or trend, then this is a sign that your business is on the verge of been liquidated.
"Your greatest and most powerful business survival strategy is going to be the speed at which you handle the speed of change. That speed of change is trend." – Ajaero Tony Martins
The only prevention to loss of market share is to keep your ears to the ground for any new industrial trend, technology or innovation. You must also keep an eye on your competitor and be quick to act and adapt to any positive or negative industrial change or once again; you can diversify.
Lastly, your inability to secure funds from financial institutions could lead to business failure. I really don't know what to say on this one because raising capital is one of the most difficult tasks in business. But it is often said that "where there is a will, there is a way." If financial institutions refuse to assist you financially, you have to turn to other sources of funds.
In conclusion, the overall cause of business failure is lack of control on the part of the entrepreneur. Never leave total control of your business to your employees even if they are professionals. Remember, professionals are only there to advise you on what to do. The final decision lies in your hand as the entrepreneur and business owner.
"Before making an important decision, get as much as you can of the best information available and review it carefully, analyze it and draw up worst case scenarios. Add up the plus or minus factors, discuss it with your team and do what your guts tell you to do." – The Mafia Manager
Reference
Preliminary Assessment
The steps involved in evaluating and choosing a new venture not only include assessing the potential to generate the desired level of profit in the desired time frame but also the preliminary assessment of both personal and project considerations.
Prior to evaluating the financial feasibility of your business idea you need to ask yourself the following questions:
| Customer Sensitivity | High | Medium | Low | Not at All |
| Price |  | | | |
| Quality | | | | |
| Special Offers | | | | |
| Where Purchased | | | | |
| Credit Available | | | | |
| Promotion | | | | |
| Packaging | | | | |
| Market Size and Trends | | | | |
