According to the Small Business Administration (SBA), thirty-three percent of new small businesses fail within the first two years. Fifty-six percent fail within the first four years. You can increase the odds of success by knowing the 10 common problems small business owners face.
Not Enough Cash
Most businesses fail because they lack enough cash at first and take on excessive debt as a result. Before you set off on your adventure, make sure that you have sufficient cash to operate for the next 12 months, using your worst case scenario.
Spending Too Much, Too Early
Cash on hand is king! This needs to be the golden rule for start-ups and small businesses. Many entrepreneurs and small business owners have a fundamental misconception of how business operates. As a result, many spend their seed money, or start-up capital, before revenues start rolling in.
No Rainy Day Cash
When the going gets tough, small businesses fail. In part, that's because most start-ups and small businesses fail to set aside cash reserves that can be tapped into when the market sours.
Growing Too Big, Too Fast
Too many owners grow their business too quickly without really determining whether they should, or even whether they can afford it.
Location, Location, Location
Too many retail owners are not savvy negotiators and sign what they think are "cheap" leases. Consider all factors before signing on the dotted line.
Inexistent Internal Controls or Poor Execution of Existing Controls
Too many times start-ups and small businesses lack any type of work process necessary to ensure that things are done consistently. Furthermore, small business owners and entrepreneurs generally lack the experience and skills to hire the right people, monitor their performances, and deal with them when they don't work out.
Poor or No Business Plan
If you fail to plan, you're planning to fail! A well-drafted business plan is your road map to success. If nothing else, having to write a business plan forces you to think about the what, when, where, how, and why of your business.
Ineffective Marketing and Self-Promotion
People can't buy what you have to offer if they don't know it is available! Sounds logical? Yet many small businesses still fail to develop an effective marketing strategy, or set aside enough money to implement it.
Competition
Loyalty is earned, not bought. An existing customer who is willing to purchase your product or service again is your best customer. Don't lose him or her. Make sure that your customer has a reason, or better yet multiple reasons, to continue doing business with you instead of your competition.
Failure to Accept Change
Recognize opportunities and remain flexible to adapt to changing times. Better yet, drive the changes. This holds especially true for your work processes. Constantly ask yourself and your employees, if you have any, what is working and what is not. Always question how things are done and wonder how they could be improved.
Business Failure
Everything must go