Failed Business

Thousands of new businesses start each year worldwide. We live in times that force us to make money any way that we can. Many businesses, however, fail during their first year of operation. There are many reasons why a business can fail, but the most common reasons why new a businesses fails is due to mistakes made by the owner. It all lies in the poor management skills, lack of working capital, or mistakes in management, suck as lack of record keeping or not having a well established customer base.
However, even after a business succeeds during their first year of operation, it is never set in stone that they will make it. Many huge businesses that have been running for years, or corporations, end up filing bankruptcy. You would not think that a well established corporation fails due to the lack of record keeping (although such is possible). The main reasons why businesses fail all the time is because of competition or changes in the business environment.

Competition is hard on any business because it forces it to constantly evolve. One slow move, or a too late of a update, and a newer and better business could have taken your clientele. Changes in the business environment allow competitors with better technology and market knowledge to take you on. These can include the following:

• new competitors (more businesses to choose from for the person)
• legal changes (e.g. outlawing the product all together)
• economic changes that make the customers think about where they spend their money, which they now have less to spend.
• advancements in technology that make the methods used by your business old-fashioned or even more expensive. ( which leaves the competition with a better price on the product)

For more of a case study on Bankruptcies we look at some famous or well established companies.

One of the companies that will be discussed is Fruit of the Loom. Fruit of the Loom was a leading international apparel company. The Company was one of the world’s largest manufacturers and marketers both of men’s and boys’ underwear,and women’s and girls’ underwear. Its manufacturing extended to printable T-shirts and fleece for the activewear industry, casualwear and childrenswear. It was a successful company for dozens of years, earning millions in profit, yet Fruit of the Loom filed for Chapter 11 bankruptcy protection in 1999 shortly after posting a net loss of $576.2 million.
Reasons for bankruptcy are varied, but all fit in
the categories mentioned above. The textile and apparel industry has been suffering for some time due to foreign competition, noted in the sudden dropping of their sales. As well, a large dept acquired by the company in the 1980s and unproductive business ventures, helped push the numbers into a negative region. In the end, despite its well-known brand name, the company was overwhelmed by a combination of too much debt, operational problems and foreign competition. The company was bought from bankruptcy by Berkshire Hathaway Corporation, who agreed in January 2002 to purchase the company for approximately $835 million in cash, and carry on the brand name.

Another company that had to file bankruptcy after 13 years of business is  Varvitsiotis Architecture. Varvitsiotis Architecture was an American Architectural firm, established in Oregon. The type of work they did can be categorized under Architectural Services, Architectural Drafting Services, or Architectural And Engineering Services.The firm did mostly commercial work. During it's peak year in 2008, the company had six employees, five projects under way - ensuring work for about two years -, and more than half a million dollars in annual revenue. Richard Barbis, the founder, positive in his firm was looking to expand, and build the business into a 15- to 20-person firm and was grooming two employees to be partners. However, as the stock market fell in 2008, clients started to cancel projects. Too much of the company’s work was in the private sector, for they were opposed to the public sector where many projects were financed with government stimulus money. With work scarce, bigger firms started competing with Varvitsiotis for the smaller projects it usually landed. Hence, we can see that because economic changes and strong competition, even the most confident businesses can fall.