Here are the main reasons why so many small businesses fail in the first few months. Learn to recognise these eight common pitfalls and give yourself a better head start.
- Lack of aims and objectives: The owners of the business did not set up or identify their business (or personal) aims and goals. How do you know it’s going in the right direction if you didn’t decide on a direction in the first place?
- Poor marketing and market research: Not finding out enough about the target market, and not telling potential customers about the business. If there aren’t enough potential customers in the first place, the enterprise is doomed from the beginning. And it doesn’t matter how good you are if nobody knows you exist.
- Too much start-up capital expenditure: Spending too much getting the business up and running makes it difficult to pay back the loans that were taken out. This is especially bad when the business is just getting going, before there is an established customer base.
- Wrong location: It is essential for a new business to be in a convenient place for its customers, otherwise it will lose out to competitors who have better locations.
- Cash flow problems: This is due to bad management of cash coming in or going out.
- Lack of management skills: Little or no management experience leads to loss of financial control. Brilliant ideas will go by the wayside unless they are partnered with these other skills.
- Bad planning: A business needs detailed plans for both the short-term and long-term future. They will show what the priority areas are, and when to act upon them.
- Accounting and monitoring ignorance: An understanding of accounts and accounting procedures, however basic, is required to keep things afloat. These things do not take care of themselves. It is also important to be able to monitor performance, to make sure that the original targets are being met.