Thursday, March 10, 2011

Why do small businesses fail?

Even though the economy is starting to turn around, we still see too many small businesses closing their doors.  Why?
  • The business didn't take the time to understand what set it apart from it's competitors or didn't articulate that to the market clearly enough.
  • The business wasn't set up for success.  A well developed business plan wasn't created which listed all the start up expenses and assets required and located the funding for these expenditures.
  • The business didn't know what it's break even point was and didn't systematically determine it's pricing.
  • The owner wasn't prepared for how hard a small business owner has to work and the sacrifices that need to be made during the start up years.
  • The owner lacked the people skills to effectively deal with employees, customers and vendors.
  • The business didn't have proper financial information to make decisions and change strategies.  Good financial statements are NOT just for your tax preparer to use.  They help you understand what is or is not working in your business.
  • The owner had insufficient or irrelevant experience to run their own business.  Many people who have always been an employee have no idea what it takes to be a business owner.  The owner of a small business has to know about labor laws and tax codes and licensing requirements and record keeping rules........
It breaks our hearts every time we see a business with a good product or that offers good service fail because it didn't have the proper infrastructure or organization.  We have often thought business owners should be required to take a class so they do understand all the rules and regulations they need to follow and all the other things they need to understand. 


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