What the Experts Say about Business Failures—and Why They’re Wrong (Part I)
This is the first in a two-part series on why so many businesses don’t make it.
Most businesses fail. And depending on which studies you read and believe, somewhere between three and four fail in the first seven years.
The U.S. Small Business Administration (SBA) says 50% fail in the first YEAR!
Those are not very good odds, are they?
And yet, according to a new Kauffman Foundation Study, more than 500,000 new businesses are launched in North America every month. That’s over 6 million start-ups each year!
So even in these challenging times, entrepreneurs continue to prove their optimism and their desire to own their own business.
But do you know why so many of them just don’t make it?
I’m sure you’ll agree that knowing the most common reasons businesses fail is excellent information. If we know the pitfalls, we can do a much better job of planning around them and working to avoid them.
Based on the SBA, Entrepreneur Magazine and a few other reputable sources, here’s what I compiled as the Top Ten Reasons for Business Failures.
However, I don’t fully agree with them. And I’ll tell you why.
By the way, these are not ranked in any particular order.
1. Insufficient Capital (money)
Yeah, if you have a ton of money you can afford to make a lot of mistakes.
2. Poor Management and Lack of Experience
3. Poor Location
Hard to argue with this one. You either got it or you don’t.
4. Poor Inventory Management
Could this really be in the top ten?
5. Over-Investment in Fixed Assets
Renting and leasing is often a better option.
6. Poor Credit Arrangements
When you can prove you don’t need the financing, you can get great terms.
7. Ineffective Marketing and Promotion
(See #10) All business requires sales.
8. Overexpansion or Unexpected Growth
Growing too fast can be as bad as too slow–sometimes worse.
Gee, if it weren’t for those darned competitors.
10. Low Sales
Yes, I can see why this would make the top ten.
You might be nodding your head at this list. And it does seem somewhat reasonable.
But I think these are only SYMPTOMS of business failures.
And tomorrow, I’ll tell you why I think so, with MY Top Ten List of Reasons Businesses Fail.
In the meantime, check out The Ten Pillars of a World Class Company and see how your company stacks up.
Make it a great day,
PS: Join us in early September and learn how you can bullet-proof your business in any economy.