Original: SABRE Simulation, please give sources if someone likes to quote

A study of business failures in the retail business points out that a multiplicity of small management errors over a period of time may add up to the bankruptcy of a business. 

The study reveals that most of these may be classified under the following 16 categories of management weaknesses. 

1.Failure to keep abreast of latest management techniques. (Continuous study and refresher courses in management are a necessity in the rapidly changing business of retailing) 

2.Failure to maintain balanced public relationship

3.Failure to insure against all hazards and profit leaks. (Insurance programs should be reviewed periodically) 

4.Failure to provide employees with incentives for increased productivity and for superior performance. (Proper motivation and incentives will keep the organization strong.) 

5.Failure to take advantage of cash discount of purchases. (With a four time inventory turnover, this can equal your net profit.) 

6.Disbursing profits without retaining adequate reserves. (Profits should be plowed back until the capital structure is adequate for normal contingencies.) 

7.Permitting store facilities and equipment to run down. 

8.Retaining unproductive employees for family or sentimental reasons. (Every garden must be weeded to grow.) 

9.Neglect to train a replacement for the boss. (Single owner companies where authority has not been delegated or decentralized may be left high and dry by sickness, accident or other emergencies.) 

10.Faulty inventory policies. (The size, type, variety and sources of inventory require intensive study and expert judgment. Speculative buying often gets dealers into trouble.) 

11.Volume for volume’s sake instead of volume for profit’s sake. (Top sales volume that can be secured at a net profit should be the continuous goal.) 

12.Failure to develop courteous, efficient and consumer-minded employees. (Retailing is a selling business. A sales meeting should be held every week for all employees.) 

13.Failure to deeply penetrate all market potentials with continuing advertizing, sales promotion and personal selling drives. (The inherent nature of successful retailing requires competitive aggressiveness.) 

14.Selling discounts instead of merchandise – capitulating to price competition. (Too much price consciousness in an organization can wreck the net profit.) 

15.Inadequate expense accounting and budgetary controls. (Profits are seldom denied a company that knows where it is going, plans each step, works the plan, and checks periodically to assure budgeted results.) 

16.Unwise extension of credit. 

One or two of these weaknesses may be found in nearly every business, but three or more become increasingly deadly to your business life. It is a good time of year to pause, review and reflect upon these danger points to the individual operation. We should never get too old or too complacent to improve our operation. 

The ability to analyze and understand the financial statements prepared for a business has always been one of the most important skills required by the owner/manager. In our rapidly changing business climate, to be successful is to be able to adapt to these changes. So, it is the owner/manager who knows how to get the maximum use from the information contained in the financial statements and who can determine how the business stands financially, who will be able to act effectively within this rapidly changing environment 

Sound financial analysis takes the guesswork out of the management role, and replaces it with the opportunity for solidly based decision making.