Avoiding Small Business Failure
A Forbes article cites a Bloomberg statistic that says 8 out of 10 small businesses will fail, and gives five reasons why this statistic is so high. This fact is common knowledge among small business owners and entrepreneurs. But what does this really mean?
However frightening this figure may be, it is also woefully incomplete. For starters, this statistic does not mention how long it takes a specific business to fail. Nor does it factor how many owners of failed businesses go on to start new (perhaps more successful) businesses. Finally, this figure does not explain why small businesses fail (although the Forbes article does a great job bringing up 5 reasons it thinks the failure rate is so high).
Why Small Businesses Fail
The point of this article is to address the most common reasons why small businesses fail and how to avoid them. The basis of this article is not scientific, it comes from personal experiences with small businesses. Ask yourself- do any of theses reasons sound like you?
- Ownership: Are you leading your business to success? Or are you standing in the way? Many business owners find themselves unable to delegate tasks or admit when they are in a situation beyond their knowledge.
- No Plan: Planning for the future is key for business success. However, small business owners can sometimes get caught up in their idea and forget to plan.
- Adaptability: Is your business set in its ways? Is your business able to scale up or scale down as needed? Can it quickly adapt to economic and technological changes?
- Legal Issues: Pretty much every business will run into legal and regulatory issues, but it can be particularly devastating for small businesses. Most small business owners specialize in their business, not the legal side of it.
So how can a small business avoid failure?
- Plan & Research: Write a business plan. Refine it. Figure out your target audience. Research them. Research some more. Remember that planning and research never stop, even after a business is open and thriving. Know your market.
- Know Your Limits: When you attempt to be everything, you end up doing nothing. There is no shame in admitting you are out of your depth. Know your limits, and hire the best people to fill them in.
- Learn: Remember that issues you face in your business are not a personal attack to your or your company. Ensure that you are always learning from your business.
- Seek Legal Help From Day 1: Don’t make the mistake of trying to ‘wing it’ with the legal side. Contracts, incorporation, disputes and more are all key to your businesses success. Hire a business lawyer to ensure that your business is not vulnerable.
Do any of these reasons sound like you? Do you have any stories about small business success or failure? Please share below.