5 Reasons Why Small Businesses Fail

Before you start a small business, you should understand the risks that are involved, because there are many.

Most people understand that their business could fail at any point when they start it. Many do not understand why, though. Business owners will give you every excuse in the book, from their idiot partner to the bank to the economy, but rarely does the finger come down on them.

The truth of the matter, though, is that many people are not suited to be business leaders, and as a result make poor decisions somewhere along the line. Very rarely do freak circumstances truly effect the outcome of the business; mostly, it’s just the owner.

Here are some reasons why small businesses typically fail:

Math doesn’t work

Sometimes the problem lies in the business strategy. Either there’s not enough demand for the product, the service is at a price that the owner won’t profit, they can’t afford to pay employees even though they need them, or they are competing with too many people. It’s unfortunate when that happens, but it does. Before you start a business, you should be sure that the math will work.

Bad owners

If you don’t know how to manage yourself, you probably don’t know how to manage others. You may be too stubborn to realize when you need to change something, you might be opposed to conflict or you could be a perfectionist, which means you take too long to do things well. These are just a few characteristics of bad owners, but if you want to be successful, you need to show that you can take a company by the reigns and do things yourself.

Lack of scaling ability

It happens all of the time, but if you don’t know how to scale properly you are destined to fail. This is probably the saddest way that a company can collapse, but it has been the ruin of companies large and small. Either companies try to move into markets that are not profitable, borrow too much money to scale or can’t predict the growth rate. All happen, and none of them are fun.

Lack of cash cushion

Businesses hit rough patches. It is almost inevitable. When you do hit that rough patch, you need to be able to get through it without having to immediately fold. Any money you do make on good days should go back into the company. Even more, you should create a rainy-day cushion for when you need it most. If you don’t, you risk the possibility of having to fold, even if you do have a good product.

A declining market

This goes along with having a good business plan, but you should avoid opening up your own business until you are positive that the market is right for growth, you have adequate resources and your business will sell. If you are not positive, chances are it will not do well, and when that happens, you are in trouble. Take your time, this is a big decision.

Starting a business is certainly exhilarating, but not everyone is right for the job. Be careful, but don’t be afraid to take the risk.

Anthony Sens is a digital marketing specialist for Waterline LLC, a company that provides crude oil tank cleaning

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