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7 Top Reasons Why Small Businesses Fail




small business failure

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.


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