The morning call. [volume] (San Francisco [Calif.]) 1878-1895, 1893-03-27
CAUSES OF FAILURE.
Review of the Mistakes of American
Business Men.
louisville Courier-Journ

lOul5NllAe CUUTier-JOurual
The Bradstreet Company has sent out a
small implicit containing the record Of an
investigation into the causes Of business
failures. This Investigation covers the
three years, 1890, 1891 ana 1892.
The causes of failure in business are
separated into two grand divisions-causes
due TO the fault Of those fail ng and causes
not so due. Under the first head we have
as subdivisions tncon petence, neglect OF
business and fraudulent disposition of prop
erty; under the second. disaster. failures of
others apparently solvent and special or
undue competition. Some of these are
further subdivided.
The total failures in the United States
last year were 1920. This includes only
those whose creditors sustained some loss,
and not those who sacrificed their invest
menis in whole or in part. or these fall
ures 3343, or 3D. per cent, were due to lack
Of capital, or trying to do too much busi-
ness Tor the capital employed. lncOmpe-
tence is credited with IS 8; disaster, 1872;
fraudulent disposition of property. 1913; in
experience, 90; unwise credits, 4; outside
speculation, 10; neglect of business, 3; ex-
iravaganee, Ia; failure of others, 10; un-
due competition, II per cent.
This classification relates merely TO the
number OF failures. and takes no account Of
their Importance. as indicated by the
amount Of liabilities. OF the failures last
year, the percentage OF liabilities due TO
Incompetence was 1913 ;ineXDerlence, 8; lack
of capital. 81; unwise creiiting, 4 3; outside
speculation, Z; neglect Of business, 1.6: ex-
travaRance, I6; fraud, 9.3; disaster, 25.S;
failure or others, &c; undue competition, IL.
The results shown by these estimates are
Interesting and in some instances suFpris-
ing. The small number of failures due to
uuwise credits. speculation and neglect of
business are Of the latter description. II is
to be noted, at the same time, that while
speculation is credited with but 10 of the
number OF failures, il produces 7 per rent
of the liabilities, showing that spectators
fail for much more than the average
amounts. Ii may also be noted that while
disaster Including fire, flood, crop failure
and commercial crisis caused less than one
fifth OF the failures, 1t was responsible tor
more than one-fourth of the liabilities. On
the other land. the lack of capital produces
larger percentage of the number of fail
ures than of the liabilities; in other words,
Il produces more small failures than large
ones.
A comparison of tie failures in Canada
with those of the United States shows that
60 per cent there. or twice as many as here,
are due to n lack of capital, while 81 per
cent are due to fraud, or only half as many
as in the United States 1t would hardly be
correct TO infer from this that the Canadians
are twice as honest as we are, but have rela-
lively only half as much money. The diff
ferent conditions under which business !
u0De III INC lWO couuIElts may dcCOuUt lOT
the difference, which Is very striking one
under any aspect of the case.
The most salient feature of the record Is
that it shows that the overwhelming major
ity Of failures is due to the fault of the
persons failing, only 22.S per cent being out
down as not due to this class of causes. 1t
must be remembered. however, that the
faults here meant are not all or chiefly
moral delinquents, but faults from a bust
ness standpOint-Such as inconvenience,
s..a a1V
important of all the error of trying tn do
more business than ones capital justlfies.