10 Common Reasons For Small Business Failure

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10 Common Reasons for Small Business Failures

2©2013 Experian Information Solutions, Inc. All rights reserved.Experian Public.

Small Business Survival Rate

2 Years

5 Years

10 Years

15 Years

(7 out of 10)

(Half)

(a third)

(a quarter)

7 out of 10 new employer firms survive at least 2 years, half at least 5

years, a third at least 10 years and only one

quarter stay in business fifteen years or more.

Source: SBA


Do what you do well

Entrepreneurs must have experience

Be able to anticipate challenges

Possess an awareness of the products, services and the market

Lack of Experience

#10


“Cash is King”

With tightened lending policies, harder to obtain business loans

Focus on cash flow generation to be properly capitalized

Maintain adequate reserves

Insufficient capital

#9


“Location, Location, Location”

Understand where target customers work or live

Traffic conditions, accessibility & parking

Relation to competitors

Building condition & curb appeal

Poor location

#8


Some are tempted to over-buy on essentials

Draining working capital, eroding profit

Make forecast projections

Tying line of credit to these items frees working capital for other needs

Poor inventory management

#7


Fixed assets are usually always a requirement

Evaluate usefulness and necessitybefore buying them

Consider leasing vs. purchasing

Costly fixed assets may result in poor cash flow

Over-investment in fixed assets

#6


Negotiate flexible terms from suppliers, avoid late fees

Critical for businesses to ensure terms are clear and easy to understand

Giving customers too much time to pay bills can affect cash flow

Business owners should keep tabs on their business credit score

Poor credit arrangements

#5


Many small business owners use personal credit

Places the owner at risk

Some business owners use business credit card to cover personal expenses

Consider forming LLC or corporation to shield from personal liability

Personal use of business funds

#4


Slow but steady growth preferred

Going after all the business can sometimes drain cash and reduce profitability

Sudden ramp-up requires up-front cost of inventories

Causes business to sometimes be less selective, exposing the business to potential credit risk

Unexpected growth

#3


Creates choices for consumers

Study your competitors

Take the high road to success -trashing the competition is never a good idea.

Focus energy on taking care of your customers

Using business credit wisely - one of the best ways to succeed in a competitive marketplace

Competition

#2


The ultimate measure of success is sales

Low sales can result from inferior products or services, lack of understanding, mis-reading competition

Overpricing goods and services

Keeping an under-performing sales team

Course correct or fail

Low sales

#1


Small Business Resources

Find Business Loans

Business Credit Reports

Business Valuation

Bill Payment


Find a Small Business Loan


Business Valuation


Manage Your Cash Flow


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