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Four Mistakes That Can Kill Your Small Business

While every unhappy family may be unhappy in its own way, as Tolstoy famously said in Anna Karenina, businesses only fail for one of four reasons.

That's the assertion of author and business-management expert Mark Stevens. So, what are these four fatal flaws that could doom your business? Here is Stevens' list:

1. (Lack of) leadership. Management has lost command and control. The company becomes a group of people working under the same roof but rarely, if ever, rowing the same boat. I've seen this one a lot during management transitions, too. If there isn't a clear message from the top about what is going to happen and what the change means, employees are soon engaged full time in turning the rumor mill rather than doing their actual jobs.

2. Complacency. When business is good, managers are lulled into believing the company will always perform well. Moral: Never coast. This reminds me of how Blockbuster Inc. didn't see the need to change its business model until way too late and was left behind by Netflix.

3. Belief in conventional wisdom. Examples of how following the crowd can tank your business include trying to manage by consensus (impossible, Stevens says) or rewarding people based on seniority rather than performance (just plain wrong, according to Stevens).

4. "Lust to lax syndrome." This happens when your business focuses all its resources on landing desirable, lusted-after new customers, only to follow through with mediocre service once clients are signed up. Customers are less than thrilled and soon depart. I think all the big telecommunications companies fit in this boat. Don't they put on a big splashy marketing push and offer you incentives to switch to their service? Then you find you can't get any phone reception -- or anyone on the phone to help you fix it.

Those are all certainly reasons many businesses fail, but I have to add a fifth common culprit: Failure to do market research before opening the business or launching a new initiative. Essentially, the business ends up with the wrong premise, trying to sell the wrong products to the wrong customers in the wrong place or at the wrong price.

I've seen so many businesses fall down this hole -- opening a retail store where there isn't enough foot traffic, or stocking a product that's wrong for the market. You might be a great people manager, but if you haven't researched your market and found a need that you can address, the business is in trouble from the start.

What do you think causes businesses to fail? Leave your take in the comments.

Carol Tice, a freelance writer, is chief executive of TiceWrites Inc. in Bainbridge Island, Wash. She blogs about freelance writing at Make a Living Writing. Email her at carol@caroltice.com.

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