Over the years, I have watched several companies; both big and small close shop due to unforeseen business challenges. I have seen giant companies disappear just because of a single change in trend or government policy. Now while I do not intend to list such companies that went down the road; it’s my ultimate aim to draw out the lessons learned from such companies going out of business. Now why do companies go out of business? What are the warning signs of bankruptcy? What lessons can be drawn from companies going out of business? Well, I will suggest you read on to find out.

4 Essential Lessons from Companies Going Out of Business

Lesson 1 – No company is infallible

The bases of lesson one was formed when before my very eyes; big companies that commanded respect filed for bankruptcy. Those who witnessed the global financial meltdown of 2008 woke up one day to be greeted with the news that companies presumed infallible were filing for bankruptcy. Examples of such companies were Merrill Lynch and Lehmann Brothers. Even several billionaires were reported to have committed suicide because they couldn’t bear the loss.

Now why did these companies fail? These companies commanded respect; they had the capital base and public patronage. Yet, they failed. The reason they failed wasn’t because of insufficient funds; they didn’t fail because the stock market crashed. They failed because they got arrogant and threw caution to the wind. These companies failed because they thought they were infallible; they believed they were immune to change.

This brings me back to my lesson number one: No company or business is infallible. The fact that you successfully executed a deal or you are a successful entrepreneur doesn’t eliminate the odds that you might fail in your next venture. No human or human controlled entity is immune to failure. Whether you are starting a business from scratch or you are building a business; always respect the odds. Play with intelligence and a little bit of caution; it will save you in the long run.

Lesson 2 – Going out of business doesn’t mean extinction

“Never reinforce failure; never marry a losing hand.” – The Mafia Manager

I recently wrote an article highlighting the spectacular business failure of successful entrepreneurs and how to handle business failure. Sometimes, things happen unexpectedly; which might result to failure. But I want to emphasize that failing in business doesn’t mean being extinct in business.

The ability to bounce back to success from failure or bankruptcy is what makes you a seasoned entrepreneur. Being down doesn’t mean being out. It’s only an opportunity to start over again more intelligently. You can bounce back from failure stronger and better than ever; it all depends on your mindset. If you say it’s over; it is. But if not, then you are still in the game. One of my business role model “Donald Trump” was once in a personal debt of $1billion and a corporate debt of $9billion but he pulled himself and his corporation out of the mess. If he can do it; I don’t see why you can’t repeat the feat.

Lesson 3  – Success doesn’t happen overnight; so also does failure

“Men stumble on stones, not mountains.” – The Mafia Manager

Most people wake up only to be told that a company has gone out of business and they wonder how fast things happen. But in reality; things don’t just happen. Just as success requires a process; so also does failure. Failure show fore signs but most entrepreneurs and managers don’t heed these warning signs; they wait until it’s too late and then they begin to make frantic efforts to save the company.

Companies don’t go broke overnight; they don’t go out of business suddenly, it’s a gradual process that builds over time. Titanic did not sink overnight; it began with a leak and from there things went out of control. The lesson here is this; don’t wait till it’s too late before implementing some corrective measures.

Lesson 4 – Never ignore a broken system

“Extreme problems often require extreme solutions.” – The Mafia Manager

It’s often said that a small sink can sink a great ship; and that’s the truth. The Titanic was not destroyed by a bomb; it sank as a result of a leak. So also it is in business. The smallest or often ignored unit of your business can bring your entire company down. Never ignore a broken system no matter how small and unserious it may seem; it may be the beginning of your business failure. If you notice that your customers have exceeded their credit line and it is affecting your business cash flow; take drastic action.

If you have a customer complaint; deal with it as quickly as possible. If you have a bad employee; take disciplinary measures or better still, fire him or her. If you smell a rat in your business; deal with it with a sense of urgency. Never procrastinate addressing a broken system because business problems tend to become more expensive the more they linger on.

“If you see a snake; just kill it. Don’t hire a committee on snakes.” – Henry Ross Perot

As a final note, these are the four lessons I learned from companies going out of business. One of my mentor said that “life is funny when it’s happening to someone else” and it’s the truth. But all the same, try to learn from the mistakes of other businesses and entrepreneurs because it’s less painful to learn that way.