What is the main reason small businesses fail?
I want to own my own business and want to know the do's and dont's. #business #success
Many businesses fail due to a lack of cash flow such as access to bank loans or venture capital.
Nowadays a small business should also have a strong Internet presence via digital marketing!!!!!
Jose Miguel’s Answer
Before running or starting a business, it is very important to understand the "numbers", meaning the financials. Having in mind all the different variables that affect the business and how these variables, affect the cash-flow, which at the end of the day, is what keeps your business alive.
All of the above is determined by having a good management too!
I saw a very good and profitable bakery and a dry cleaners shop both closing down in less than a year after been purchased by new owners who did not know how to manage the finances of their businesses.
Another crucial point is planning for bad times. Always have a plan B and include diversification whenever possible. If the place can switch and do something related or not to survive in tough times, get the plan designed, analyzed and ready to implement successfully in a short time.
Most small businesses fail because the owner has absolutely zero idea of how to run a small business and has entered the business for something other than financial reasons.
For instance, 70% of new restaurants fail within the first year. The reason is that the owner has no idea what makes a restaurant profitable and has no source of good advice. They often buy the place after retiring because they think it would be 'fun.' I suggest watching Kitchen Nightmares to get an idea of just how bad this whole scene really is.
I'd suggest talking to small business owners in your specific line of business first. Get an idea of what other people do and do not do well. Take a hard, objective look at what the market for this product or service really is. Build safety margins into all your estimates: if you estimate no net cash flow in the first 6 months, it might make sense to prepare for 9-12 months of no profit.
Take a look at your own finances... can you afford not to have income coming in? Are you sinking your life savings/house/car into this business? Would you be better off with a partner to spread out the risks?
Without further ado, here are the reasons:
1. Failure to identify a niche or
competitive advantage!! Think
about what makes your business
Proposition unique or different!
For example, in the current pan-
demic environment, food businesses that offer takeout tend to be doing better than those with traditional sit-down service. Those with sit-down service and MUSIC seem to be doing better than those sans music. (at least in my neighborhood).
2. Some businesses fail due to inadequate financing! Generally, experts say you should expect to have enough access to capital for about five years;
3. You need to have a solid business plan and professionals who can help you such as lawyers accountants, etc.
4. Put together a team with diverse skills, don’t work with people who have skills identical to your own! Find folks with expertise in marketing, sales, finance , public relations etc.
5. You need to have a vision about your business so that you can keep going when others discourage you!
Michael Strahan was told to “stay in his lane”as an athlete; thank God he didn’t listen!
6. Explore options to reduce business costs. Take advantage of things such as small business “incubators “ etc. Contact the SBA for information!!!!