7 Top Reasons Why Small Businesses Fail

While entrepreneurship is the backbone of our economy, often young business owners realize too late that there are many mistakes that make a small business fail. While there is great potential in starting a new business, being aware of the pitfalls will help prevent a new company from going under. While approximately 50% of small businesses fail within the first five years, there are things to help one avoid the statistics.

EXPERIENCE:
Before starting any small business, the owner should have experience in the field. This will provide connections and practical experience just not able to be gained in a classroom. Entrepreneurship works best when working with prior knowledge and experience.

CAPITAL:
Many times lack of capital is the reason a small business fail occurs. The initial cost of getting the location ready, stocking the necessary inventory and committing to a lease can shock a small business owner. A small business owner should be able to have enough money to keep a business running for at least a year before expecting to generate a profit.

LOCATION:
Location can't be overstated. Where a business is will determine its success. Drive by traffic, suitability for the location, and the right number of customers (and type of customers) are all predictive of whether a small business will fail or experience success.

ADVERTISING:
No small business can survive without properly advertising Every opportunity to get the company's name and service out needs to be taken, from a simple yellow page ad, to signage, to aggressive local and web advertising. The advertising budget is a seed for long-term success, as one new customer can generate countless more.

WEB SITE:
In the modern society, every new business needs a clear, easy to navigate website. This offers an opportunity to provide a menu, services, as well as a secondary place to market merchandise. E-commerce is one of the fastest growing ways to make money with any company.

OVER EXPANSION:
Growing too fast can actually can actually make a small business fail. Entrepreneurship can often become too aggressive for a small business owner to keep up with. Slow and steady growth is often the best way to grow a company. Obtain a committed customer base, and expand as needed, instead of growing just to be the biggest.

POOR MANAGEMENT:
A company that does not have a strong vision, plan and standards is apt to failure. This allows room for power struggles between owners and other family members. Simple inexperience with the basics of owning a company is a huge reason problems arise. Tax issues, payroll, legalities, and other unforeseen management issues can become a huge headache. Someone who wanted to own a bakery may not have thought of all the aspects of managing a bakery; it is more than providing the product or the service.
That there are risks involved in owning a small business should not deter someone from their dreams. Doing the homework ensure that your chances of having a small business fail are minimized. Research the market, the product viability, location and financing. Doing the homework is the most important part of entrepreneurship and success.