REASONS MOST START-UP AND SMALL BUSINESSES FAIL
Our MOST RESEARCHED REASONS WHY BUSINESSES FAIL – This is a 2 part series – Longer BOOKKEEPING articles have the option of AUDIO
No one likes to think of failure, yet business failure statistics are VERY high.
According to data from the U.S. Bureau of Labor Statistics, about 20% of U.S. small businesses fail within the first year. By the end of their fifth year, roughly 50% have faltered. Aug 7, 2020
We are not immune. Over the course of many years, we have started a number of brick & mortar and home based businesses. We have had a few failures along the way. These have been great learning experiences, ones that we hope to share with you as time goes on.
These experiences have led to a number of successful businesses under our belt.
If you have a good grasp of why so many businesses fail, you can avoid making these same mistakes.
There were a number of reasons why the majority of businesses fail, and the following are generally considered the main ones;
Number one, and the most agreed upon is no planning and poor management.
We have been in this lot; lack of cash flow and capital.
This one is very strong for brick and mortar businesses; wrong location.
And of course, an inadequate marketing plan, which also indicates a lack of money to follow up with the plan.
Not researching the competition, especially local competition.
You may not support this if you have a hobby you are sure will produce a great income, but he wrong choice of business. Sure, you’re convinced you have a good idea, but most people don’t do their research.
This one is both good and bad, depending on the outcome. The business grows too quickly.
Any one of these reasons can cause your business to fail, but combine two or more and your business will be in hot water.
Your business must have a business plan, the key to business success in its development phase.
To help develop a sound and well researched business plan, you only have to drive around your community to see the revolving door syndrome of retail outlets closing down after a few months, and a new venture starting.
Service industries suffer the same fate.
The usual reason for these failures is lack of planning, no matter which business you pursue, it needs a great manager at the helm.
Good management encompasses everything from customer service to running an efficient office.
Lack of cash flow and capital cash flow describes the flow of money within a business.
Businesses are often started by people with very little money to invest in the startup, and not enough to see the business through the first two fragile years.
Without enough capital investment, important corners are cut. Shoestring budgets make survival and growth difficult. Without money to purchase the necessary equipment, support monthly overhead, or spend on marketing to launch the business, the business cannot get off to a positive start.
The average business is started with minimal capital, often borrowed from family, banks, credit cards, or high interest loans. s
Some people increase home mortgage. NOT an inadvisable step because if the business fails the home could be lost as well.
What about location? The wrong location. Big box stores and malls almost guarantee failure if your business provides any of the products or services provided there.
Location is key for retail businesses To succeed.
Business startups often locate their businesses in the wrong areas, but the rent is so cheap they cry with delight. A huge mistake made by many new startups.
Studies show that the average consumer will travel no more than three blocks out of their way, particularly if the same product can be purchased closer.
No amount of advertising will entice customers to an out-of-the-way location if they can buy the same product more conveniently. There is no such thing as cheap rent if you aren’t in the right location.
We are here to serve you. Ask any bookkeeping question via the contact page.
Larry