I was having a coffee recently with a colleague and we got around to talking about the causes of business failure. Obviously the environment is severe – with customers buying less and with credit harder to come by. But another reason for business failure is that some businesses were never viable to begin with. The owners started these businesses without assessing viability – without carrying out market research. My colleague then used a turn of phrase that stuck with me – he said that the “whole country is a monument to the absence of market research”. (Our country is Ireland by the way.) He was referring to our property collapse where prices have halved since their peak. Nationwide we have tens of thousands of new but empty apartments and houses. What drove such insane property development? Greed? Lenders being too loose with credit? Speculation?
There were obviously a number of factors. One of them was that some people never stopped to ask : Who’s going to buy these homes we’re building?” “How many can I reasonably expect to sell each year?” “What price will the market pay?” “Is there enough of a margin in this for me?” Now it’s easy in hindsight to criticise people who were perpetuating a property bubble. A lot of people who benefited from the early and safer stage of that bubble were simply lucky in terms of their timing. It remains true though that, had more people paused to conduct market research, a lot of money and anguish would have been saved.