Amy's Reasons Why Small Businesses Fail

If you are an entrepreneurial type, if you already run your own business or you are just considering creating one of your own - please read my reasons why small businesses fail. I didn't create this list nor is anything earth shattering - breaking news. These reasons are compiled from a number of lists and articles I have read throughout the years. If you have read anything on starting or running a small business - you have most likely seen these reasons too. These are just the ones that I found to be most profound, were the common themes in the various articles I have read and what I have seen in my professional career. So here goes - in no particular order.....

1. Not knowing or ignoring the competition.
There is a difference between direct competition and indirect competition. It is important to know all of these when you are considering your competition. Let's face it, no matter how exclusive or unique your product or service is - someone else is doing it too. I am not trying to be a drag here - it is the fact. There are other people doing what you do and you need to find a way to standout so your product or service gets noticed.

Direct competition are those companies that do the same things you do. Let's say you run a small veterinary clinic. Your direct competition are other vet clinics. Your indirect competition is the Internet - where people can self-diagnose their pet's issues. Another form of indirect competition might be catalogs that sell vaccines and medications so the average person can medicate their pet. You, as the clinic owner, need to find a way to sway other clinic patrons into your clinic and how to get the DIY'rs in your front door too.

2. Poor planning. This covers a full sprectrum of concerns. Are you planning for everything? Things to consider and to have plans for are - emergencies, lack of cash flow, too much business, how to expand, furthering your education and training. The list can go on and on. The important thing in regards to planning is to be aware of the need to plan and to do it! Don't react to situations that could have been planned out before the situation occurs.

3. Not admitting where your personal shortcomings are. I think as small business owners we either think we can do it all and sometimes we do have to do it all. But not realizing where you lack expertise can lead to a whole bunch of problems. Unless you are a lawyer, accountant, insurance guy, HR professional, a high tech person, a marketing specialist, AND still being whatever it is that you do, at some point, you need to admit that you need help. Let's consider a situation in which you need legal advice. Researching a legal topic could waste time and money that you don't have, where you might have saved both by hiring an attorney, even if you have to pay for her service. (Don't forget business consultant too, they know lots of stuff too- hint, hint).


4. Not knowing or understanding financing - how much are you really making? How are you tracking your cash flow? In your head, on stickies? It is probably time to invest in an actual accounting software and use it! It might mean taking a class or hiring a bookkeeper to help set up your finances, but in the long run you will be able to track your figures from year to year and know exactly how much you bring in. This also helps your accountant with yearly taxes and give you a solid foundation if you ever wish to sell your business.

5. Not being flexible and not changing with the times. Going back to the vet clinic, what does your customer base need? Do they need extended hours, more specialized care, maybe they want more communication via email. Again, knowing what the competition is offering, knowing what your customers want - will help you mold and adjust your product and service and keep you in business for a long time.

You can find many more information how to combat differenct reasons by doing your own research. Or stick with me and I'll continue to offer ways to help you keep up with the times and keep your business strong.

Until next time,

Amy =)
www.amymunns.com


References:

Townes, G., & Hughes, A. (2002, Jan) Beating the odds. Black Enterprise, 32(6), 35.
Jordan, C. (May, 2005). How to avoid the most common reasons for small business failure. Retrieved from Ezinearticles Feb, 2008 http://ezinearticles.com

Why do many small businesses fail? Retrieved Feb 2009 from http://www.allbusiness.com/business-planning-structures/business-plans