The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1893-06-06
CAUSES OF FAILURE.
Statistical Review OF the Mistakes
American Business Men.


Statistical Review of the Mistakes OF
American Business Men.
The Bradstreet company has sent out
small pamphlet containing the record
of an investigation into the causes of
business failures. This investigation
covers the three years, 1890, 1891 and
1892
The causes of failure in business are
separated into two grand divisions
causes due to the fault of those failing
and causes not SO due. Under the first
head we have as subdivisions incom-
petence, neglect of business and fraud
ulent disposition of property; undeHthe
second, disaster, failures of others APP
parently solvent and special or undue
competition. Some of these are further
subdivided.
The total failures in the United
States last year were 1920. This in
cludes only those whose creditors sus-
tanned some loss, and not those who
sacrificed their investments in whole
or in part. OF these failures 3,343, or
32.5 per cent. were due to lack of capi-
tai, or trying to do too much business
for the capital employed. Incompe-
tence is credited with 1876; disaster,
1872; fraudulent disposition of property,
1913; inexperience, So; unwise credits.
4; outside speculation, 10; neglect of
business, 8; extravaganza, IA: failure
of others, l.9; undue competition, ii
per cent.
This classification relates merely to
the number of failures, and takes no
account of their Importance, as indi-
Gated by the amount of liabilities. OF
the failures last year, the percentage
of liabilities due to incompetence was
1913; inexperience, 8; lack of capital, 81;
unwise crediting, As; outside specula-
ton, z: neglect of business, lie; extrav-
agance. Is; fraud, 9.3; disaster, 25.ss
failure of others. &c; undue COMPETE
ton, 1.2.
The results shown by these estimates
are interesting, and in some instances
surprising. The small number of fail
ures due to unwise credits, speculation
and neglect of business are of the latter
descrs ,tion. It is to be noted, at the
same time, that while speculation is
credited with but 20 of the number of
failures, it produces Z per cent. of the
liabilities, showing that spectators fail
for much more than the average
amounts. 1t may also be noted that
while disaster (including fire, flood,
crop failure and commercial crisis)
caused less than one-ffth of the fall
,-acyonc,b1o
one-fourth of the liabilities. On the
other hand, the lack of capital produces
a larger percentage of the number of
failures than of the liabilities; in other
words, it produces more small failures
than large ones.
A comparison of the failures in Can.
ada with those Of the United States
shows that IS per cent. there, or twice
as many as here. are due to lack of
capital, while So per cent. are due to
fraud, or only half as many as in the
United States. 1t would hardly be COR
rect to infer from this that the Ca-
nadians are twice as honest as we are,
but have relatively only half as much
money. The different conditions under
which business is done in the two coun-
tries may account for 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
majority of failures is due to the fault
of the persons failing, only 22.s per
cent. being put down as not due to this
elias of causes IT must he reTof,ru hered
however, that the faults here meant
are not all or chiefly moral delinquents,
but faults from business standpoint,
such as incompetence, errors of judg-
ment, including as the most important
of all, the error of trying TO do more
business than ones capital justi6es.-
Louisville Courier-J ournal.