Starting a business can be one of the most exciting \u2014 not to mention rewarding \u2014 things you can do. But it\u2019s important to go into the process with open eyes. The reality is, almost all of small businesses fail within five years. While statistics vary slightly according to timeframe and the country under consideration, Bloomberg\u00a0found that 8 out of 10 businesses started by entrepreneurs fail int he first 18 months, while the US Small Business Administration\u00a0found that over 50% of small businesses fail in the first year, and 95% fail within the first five years.<\/p>\n
Those are some pretty scary numbers \u2026 so what\u2019s going on there? Why are all these businesses failing? And most importantly, what can you do about it?<\/b><\/strong><\/p>\n Most small businesses fail because of:<\/p>\n <\/p>\n There\u2019s been such a boom in the small business world over the last 10 years that it sometimes seems like everybody has started a business at some point or another. And while it\u2019s great that the barriers to entry to the business sector have been lowered by things like the rise of Internet entrepreneurship, when you\u2019re surrounded by success stories, it can become easy to think that starting a business is, well, easy. The truth is, it takes experience to run a successful business, so if you don\u2019t have it yourself, you definitely need to be talking to someone who does.<\/p>\n <\/p>\n There\u2019s a lot that you can bootstrap in a small business, especially when you\u2019re first starting out, but the old saying that you have to spend money to make money is a cliche for a reason: it\u2019s absolutely true. Many businesses fail because they simply can\u2019t get the funding they need, or worse, the people running them just don\u2019t have the money management skills to make the most of what they do have.<\/p>\n This is one area that\u2019s incredibly important to get nailed down right from the beginning, so if you own a small business (and especially if you\u2019re just starting out) make sure that you\u2019re talking to your accountant regularly. They\u2019re not just there to do your books \u2014 they can give you advice on financial management too, so take advantage of it!<\/p>\n <\/p>\n This one can seem kind of counterintuitive. Growth seems like it would always be a good thing, especially if you\u2019re fairly new to business or if you\u2019ve been in a slump for a while. But it\u2019s really important that you\u2019re able to control the growth of your small business; otherwise you\u2019ll end up with all kinds of problems, from supply issues to management crises to difficulty with staffing. The best way to avoid this is to work with someone who\u2019s more experienced in business, or to get expansion advice from your accountant, who can make sure you\u2019ve got the finances to back your expansion and also help you with things like business planning.<\/p>\n <\/p>\n I\u2019m sure you knew about this one going in \u2014 every business has some sort of competition, even those that are incredibly specialised or incredibly successful. This is a constant risk in the business world, but it doesn\u2019t have to be the end of your business. As long as you\u2019re aware of it, you can take steps to remain competitive in the market.<\/p>\n One big mistake people make here though is only looking outward at the competition. While it is important to know what the people in your sector are doing, it\u2019s equally important to look inward at your own business to see how it fits into that sector. This means getting clear on things like your Unique Selling Proposition (USP), your target market, and how you can best communicate that USP to them. Combine that with a good understanding of your competitors\u2019 USPs and how they\u2019re approaching your common target market, and you\u2019ll be well on your way to beating them.<\/p>\n <\/p>\n One of the fastest ways to kill a great, healthy business is with a bottleneck. Unfortunately, this type of problem is also very common in small businesses simply because the nature of the business is often much more personal than more corporate businesses.<\/p>\n When you\u2019ve founded something, it can be so hard to back off and let other people take the reins, but not doing so will cause endless problems, and will eventually run the business into the ground. So make sure that you\u2019re willing to delegate, know how to do that well, and hire the right people from the start. (This is where having a plan for growth will absolutely save you \u2014 if you know when and how you\u2019ll be expanding you can plan ahead and make good management and hiring decisions instead of having to make them on the fly and hoping everything turns out for the best.)<\/p>\n <\/p>\n So many small business owners just dive into running a business and hope that things will work out. And even those that do plan ahead often find that their business plan becomes entirely theoretical in the face of the practical, day to day aspects of actually running the business. But it\u2019s essential to be able to keep a bigger picture view of your business.<\/p>\nA lack of experience<\/h3>\n
A lack of funding or poor money management<\/h3>\n
Unexpected growth or expanding too fast<\/h3>\n
Competition<\/h3>\n
Bad management<\/h3>\n
An unclear business plan (or no plan at all)<\/h3>\n