Why do small businesses fail? That’s one of the most important questions. Starting a business is not easy, and there are countless statistics out there about the survival rate of startup companies.
Whether you’re a seasoned small business owner or an entrepreneur just starting out, statistics can be a little scary. What you probably don’t realize is the sample of small companies cited in these studies. Fit Small Business does an excellent job of debunking some of these numbers and defining the types of companies taken into consideration.
BELOW ARE FEW REASONS
1. Financing Hurdles
A primary reason why small businesses fail is a lack of funding or working capital. In most instances a business owner is intimately aware of how much money is needed to keep operations running on a day-to-day basis, including funding payroll; paying fixed and varied overhead expenses, such as rent and utilities; and ensuring that outside vendors are paid on time.
However, owners of failing companies are less in tune with how much revenue is generated by sales of products or services. This disconnect leads to funding shortfalls that can quickly put a small business out of operation.
2. Lack of Funds
The number one reason business shutdown is the lack of funds. If an Entrepreneur is unable to properly plan finance and project future performance, the business could run out of cash – forcing a shutdown.
Therefore, small businesses must always have an adequate cash reserve and plan for fundraising well ahead of time.
3. Lack of a Business Plan
Most small businesses and startups do not have a proper mission statement, goals, or business plan. A lack of a business plan shows that the Entrepreneur lacks planning or organization leading to many shortcomings in the decision-making process.
Further, a lack of a business plan also hinders the raising of capital in the form of equity or debt, as investors or creditors need a proper business plan for investment or credit decisions. Therefore, to better manage the business or easily raise capital, it is a must for every business to have a business plan. Lack of a business plan can lead to losses and business failure.
4. Starting With Too Much Debt
Sometimes, it’s necessary to go into debt to finance the launch or purchase of your business. Few aspiring business owners have the cash on hand to pay out-of-pocket, so loans are a reasonable choice to help finance a new venture.
But if you don’t prioritize repaying your debt and making timely payments, it becomes harder and harder to grow operations.
5. No vision
Successful businesses owners have a clear vision of their purpose and mission. Your vision serves as a roadmap to help you see where you are today in relation to where you want to be tomorrow. Your business plan serves as the mechanism that will get you there.
6. No marketing plan
A marketing plan outlines the steps you intend to take to sell your product or service. As one component of the overall business plan, it identifies your niche and the marketing strategies you’ll employ to reach your target market.
7. Poor Management and Leadership
Effective management and leadership skills are essential to business-building success, and a lack of either can lead to confusion and conflict within the ranks, poor morale, and reduced productivity.
Make it a priority to acquire the skills needed to strengthen areas where you know you are weak. Read books on leadership from authors such as John Maxwell, Stephen Covey, Peter Drucker, and Sheryl Sandberg; join peer advisory groups like Vistage or take an online course in leadership from Dale Carnegie.
We have always emphasized the importance of having a good website for your company because it can act as your best tool for marketing and sales. A poorly designed website can repulse people from your business and can cause you to lose customers before you even have them. Get in touch with HyperEffects to work on creating, enhancing, and making the website of your company more user-friendly.