What are the reasons for business failures?

14:15 - 25.05.2021

May 25, Fineko/abc.az. What are the reasons for business failures?

On this topic, we talked to Niyazi Abbasov, director of business advisory department of the international audit and consulting company Baker Tilly.


- The company you work for is one of the leading audit companies in Azerbaijan, and you work closely with entrepreneurs in various fields. What is the reason, according to your observations, that companies established in Azerbaijan are facing failure, and what do your observations show?

Niyazi Abbasov:

“We have observed that companies fail for four main reasons.

The first reason is that the company does not have a full-fledged market research, business strategy and business plan. No business project can be successful without a business case. Unfortunately, some entrepreneurs, in a hasty market research, decide to engage in entrepreneurial activity without conducting economic analysis and drawing up a business plan.

The second reason is mismanagement and personnel policy. In this regard, I can note that the appropriate personnel are not assigned to the required positions and a system of their motivation is not provided. We also see entrepreneurs who, in many cases, justify their mistakes with arguments such as “no good personnel”.

As a third reason, I would name poor financial management. Despite the fact that many companies have the right strategy and management system, they do not manage their financial resources properly and therefore face the threat of bankruptcy.

This happens for various reasons; the company is growing so fast that it cannot find financial resources that would support this growth. As an example, when we often witness an uncontrolled increase in sales, receivables and stock balances, borrowing more than necessary, and the inability to properly and timely coordinate the founder's resources or financial resources, which leads the company to a crisis.

As a fourth reason, it can be noted that companies that did not invest in technological innovations at one time are defeated by competitors and are forced to leave the market. Currently, businesses in the world and in Azerbaijan, introducing digital technologies, strive to be one step ahead of the competition, and more skillful ones take leading positions in the market.