A number of statistics published state that “almost 50% of all small businesses fail with the first fours years in operation. Other statistics on small business start-up success include;
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The Small Business Administration (SBA) keeps the stats on business failures and claims that more than half of new businesses will disappear in the first five years.
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A study done by Inc. magazine and the National Business Incubator Association (NBIA) revealed that 80 percent of new businesses fail within the first five years.
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Businesses with fewer than 20 employees have only a 37% chance of surviving four years, according to Dun & Bradstreet reports.
Although small business growth contributes significantly to a nation’s continued economic expansion, new entrepreneurs must know that it takes more than a good idea for a small business to succeed. The term “People don’t plan to fail, they fail to plan” can also pertain to small business start-ups.
The following are ten reasons why small business start-ups fail –
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Limited Business Planning
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Poor Business Models
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Inefficient Pricing Models
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Management / Operational Issues
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Ineffective Marketing
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Lack of Competitor Knowledge
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Credit / Debt Issues
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Inaccurate Sales Forecasting
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Poor Accounting / Financial Management
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Lack Proper Training for Management and Employees
There are a number of ways for a small business to withstand most external and internal problems, and keep its doors “open for business.”
i) Advance Preparation – This involves assessing the risks of the business in relation to external factors. Conducting a comprehensive discussion with a professional small business consulting firm can help in considering any potential problems or challenges the company may face.
ii) Market Assessment – By conducting a thorough market research analysis of the potential marketplace, an organization can identify its competitors, the target market, industry limitation and much more.
iii) Business Plan Development – A business plan can provide details about the business idea (market, competitors, target market, financial requirements, ROI, etc.) The business plan can also be used to monitor performance against targets, once a business has been in operation.
iv) Training – Most entrepreneurs know their products/services very well, but they lack in other areas of running a business. Such areas include; marketing, customer service, accounting etc. Although some of the business areas can be outsourced to a professional small business consulting firm, it is important for the business owner to have a solid understand of the areas of their business.
v) Adequate Cash Flow Management – As a start-up business, it is important to keep a tight control over credit and cash flow. This will help a company reduce any financial problems, which can have an impact on its daily operations; keeping the company financial stable.
Small business owners seeking to enter a particular marketplace can eliminate from being one of the statistical figures by; taking the proper steps, identifying potential problems, developing long term strategies, and seeking professional advice from a professional small business consulting firm. Studies have proven that small business owners that have access to business management information plus assistance from experienced business advisers have a higher success rate than those that don’t.
