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Why Do Small Businesses Fail?

Posted by Charles Fisher in Articles


10 Components to Avoid

Starting a business is risky. It has been estimated that 50% of businesses fail in the first four to five years. Although an entrepreneur might be completely motivated and passionate about their start-up, certain mistakes can be made that seal the doom of the new business. An experienced website business broker divulges what to avoid:

  • Mediocre business plan. Don’t downplay the importance of a well thought out business plan. Marketing, finances, management plans, competition and strategy all need to be mapped out in a strong business plan.
  • Remembering that the competition never rests. Even though that’s humanly impossible, it’s best to think of it this way so you’re always one step ahead of them, with the majority of customers to prove it.
  • Not tracking finances. What’s coming in and what’s going out? A failed business usually has an overabundance of debt because the owners failed to pay close attention to finances.
  • Not having enough reserve capital. Utilities, food, labor, gas etc. are always on the increase. Keep this in mind and have enough reserve capital on hand to pay for these increases especially during the slow times.
  • Blowing through start-up capital. Many businesses fail because the owners blow through the start-up money before the business is in the black. To avoid this, talk with owners of successful small businesses and ask them for advice, you can also seek advice from an experienced website business broker.
  • Expanding beyond your means. Everyone knows that business growth is preferred, but at the beginning, trying to accommodate investors and assuming additional overhead can spell the death of a small business. Grow only as the product or service demand dictates.
  • Choosing the wrong extension. Dot coms are the king of the internet ecommerce world, dot nets come close but for now, dot coms are king and if the website company doesn’t have a dot com extension, you may already be playing a fool’s game. If you’re interested in selling a website and buying a new one, consult a website business broker.
  • Poor customer service. To employees, your baby is just “their job” but make sure they are skilled and knowledgeable in what it takes to please customers. Create incentives and methods to monitor certain inside tasks.
  • Stuck in the Stone Age. Start-up companies that fail to move forward with technology and trends end up stuck in the tar pits with the elephants. It’s important to read about upcoming market and industry changes, and to wear many hats by implementing those changes into the business.
  • Failure to market effectively. Only invisible customers with invisible money will visit your business if you don’t advertise effectively. Contact a superb SEO and SEM consulting firm after seeking out the advice of a website business broker to help you launch your business into the sights of prospective customers.