There are many reasons small businesses fail, and there are no guarantees. However, some of the problems are avoidable, especially if you know what they are and can avoid them before you ever get started. Following are three common reasons why many small businesses fail and how to avoid falling prey to them.
Lack of Education
You do not necessarily have to have a degree, but if you do not know what you are doing, you are going to fail. Some learn by going to school, some learn hand on, and some learn from others. Typically, the best way to learn is to combine all three methods, but you must learn. Those who are successful and have seemingly no formal education have probably been in the business under someone else for a while or have tried on their own and failed before finding success. No one really wants to learn by failing, so study everything you can about what you need to know to run your business, before you start. Even just reading and talking with others is a form of educating yourself.
Lack of Information
Find a way to track what is happening. How is the competition doing? What are your customers happy with and what are they not happy with? What kind of patterns can you see in sales and why are the patterns the way they are? You can learn so much and be so much more successful with access to the right information.
Lack of Funding
While it isn’t everything, it truly is in a lot of ways, all about the money, honey. Without it, you cannot even really get a business started. Without enough of it, you certainly cannot keep one running. Whether you look for investors, seek small business start up loans, or try to finance the business privately, you need money for any small business. Make sure you have enough resources in reserve. Running a business is filled with unexpected costs – broken furnaces, burst water pipes, equipment that suddenly needs to be replaced. For startups, estimate how much it will cost to get up and running… and then borrow more. If things go smoothly, you can pay the money back, but it is hard to approach a lender a second time if you underestimate your costs. It sends a big red flag.
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