It is somehow self-evident that poor management causes companies to fail. These are the common defects I see.
Autocratic dominance exercised by people who allow little discussion, hear no advice, and surround themselves with colleagues who are likely to agree. Entrepreneurs who started as one man firms need to diversify management to avoid erratic transition. If they continue to be the sole decision making, the firm is likely to suffer
Firms also need to diversify their management and board across functions. Boards typically overweigh representatives with finance, marketing executes. The belief is that these executives influence business heavily. Be sure to include equal weightage of engineers, HR and even activists.
Negative cashflow from operations is a sure signal of short-term issues. Rapid growth is not an excuse. Dramatic expansion in younger companies is management error. I’ve seen examples where failing companies take big gambles in the hope of flipping the circumstances. A big project can include mergers, diversification into unrelated sectors.
When a company use creative accounting to justify performance, you should go short on the firm. For example, a firm can overstate revenue or understate expenses. They are smokescreen to disguise firm failure. Firms capitalize expenditure, revalue inventory (or refuse to devalue), recognize revenue upfront instead of matching to expense, and even extending the life of assets.
Do not invest in such firms, or commit your career to firms with such symptoms.