Why businesses fail - an interview with Pepita Diamand

We featured the Wrapit business story in our AQA AS Business Unit 1 revision workshops in December 2008. Students were asked to evaluate two alternative business start-ups - one of which turned out to be the failed wedding gift lists service Wrapit. Now the co-founder of Wrapit has given an in-depth interview which provides a rich source of insights for our students into why businesses fail…

The interview is in the Daily Mail here.

Some key points which emerge:

- Spotted an opportunity to provide distinctive wedding gifts - but was the business idea viable
- Competing against much larger and better-resourced competitors (e.g. John Lewis, M&S)
- £450,000 raised from small investors - but this did not prove enough
- Market size £200m pa
- Hard work - typically 15 hour days which put a great strain on personal relationships
- Rapid expansion - much too fast
- What seemed like a successful business was not actually breaking-even
- Wrapit never made a profit, though successive business plans claimed that it would
- Losing the support of the bank (sources of finance)
- Arrival of the credit crunch made it impossible to refinance the business
- The power of online methods of customer feedback - e.g. Facebook groups