How many businesses fail

how many businesses fail

12:06 pm

Depending on who you ask, between 50% and 80% of new businesses fail within the first year or so of operation. As a hopeful entrepreneur, you may see statistics like that and be confident that you will be one of the successes, but how do you make sure that happens? Let’s look at some of the reasons that businesses fail, and how you can inoculate yourself against them.

Cash Flow

Many small businesses struggle to maintain adequate cash flow to pay all their bills, especially as they work to gain their first 100 customers. Some businesses have just enough money saved or loaned to cover start up costs, and then fall apart quickly when the business they’re hoping for doesn’t surface.

What can I do about it?

  • Plan ahead Ideally, have three months of business expenses sitting in the bank so that you can weather slow times, especially until you get the hang of your business’s seasonal rhythms (Hint: All businesses are seasonal, unless you’re doing business in legal gray areas ).
  • Cash on hand If you can’t maintain three months of expenses, then it’s absolutely necessary that you watch cash on hand like a hawk. Make sure that every dollar you’re spending is working to build your business.
  • Keep customers to lowest terms possible Sometimes you

    don’t have a choice of when your customer pays, especially if you’re working in the B2B world, but if you can keep invoices due when they’re written, instead of net 30 or net 60, you’ll be happy that you did.

Branding Failure

Founder Failure

What can I do about it?

  • Commit to your business, but have a life. Burnout is most likely if you don’t do anything other than work. Even if you’re working from dawn to dusk, commit to at least one thing each week that’s just for you. A day at the gym, a family dinner, drinks with friends. Remember why you decided to go on this crazy trip, and find time to recommit to your mission.
  • Have outlets for your frustration. Your friends and family may be willing to listen to you vent, but they might not have enough context for why your concerns are so, well, concerning. Connect with your local chamber of commerce or SBA chapter to find other entrepreneurs to talk to about what you’re struggling with.

Financial Mismanagement

Not all financial mismanagement is malicious. This can be as simple as not keeping up to date with your accounting, not planning ahead for taxes, and not keeping an accurate eye on employees.

What can I do about it?


Category: Personal Finance

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