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5 Reasons Small Businesses Fail — And How to Avoid Those Fatal Pitfalls
By Brian Sutter, AllBusiness.com
October 31, 2017
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By Brian Sutter, AllBusiness.com
October 31, 2017
While most small businesses do fail, yours doesn’t have to be among them. Even more fortunately, the things that cause small businesses to fail are oddly consistent.... This is good news for you. Because if you know what those causes are and how to deal with them, then you’ve just knocked out most of the things that could bring your business down.
1. The owners didn’t verify the market
Note that I wrote “verify” your market, too. Don’t just confirm it exists. You need to verify that those people are interested in what you want to sell.
2. They didn’t understand the full scope of what running a business requires
Star employee gets tired of his employer. Leaves, sets up his own shop, nearly drowns in the nuts and bolts of running his business. He barely ever gets time to do the thing he so excelled at in his old job.
3. They didn’t understand the business they were going into
You’re an awesome cook — you just need a great location, some staff, and enough money to equip the place and stay open for a few months until you hit operating costs. But you’re not just running the restaurant. You’re the owner. You’re responsible for all the financing, the legal issues, the staffing issues, the certifications (including that coveted liquor license), the food sourcing . . . and all the other problems that will arise from any one of those systems.
4. Unforeseen disasters
Staying afloat when things are going well for your business is not enough. Your business needs to be disaster-proof.
5. Insufficient funding
- Have enough insurance.
- Have enough staff to cover when people get sick.
- Have enough money to make it through at least six months if your revenue is cut.
- Train your employees well enough that if you had a medical event they could take over.
- Keep your overhead as low as possible.
- Never think you’ve got money. In other words, stay thrifty.
- Keep your eye out for new ways to monetize your business.
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