Sunday, December 19, 2010

10 Reasons Why Small Businesses Fail

SUCCESS in business is never automatic. It is not strictly based on luck - although a little never hurts.
It depends primarily on the owner's foresight and organisation. Even then, of course, there are no guarantees. Starting a small business is always risky, and the chance of success is slim. A lot of small businesses come and unfortunately, go all the time. Over 50 per cent of small businesses fail in the first five years. Why? What goes wrong?
A US-based writer, Michael D. Ames in his book called "Small Business Management" gave 10 reasons for small business failure.
The reasons are:-
1. Lack of experience
2. Insufficient capital (money)
3. Poor location
4. Poor inventory management
5. Over-investment in fixed assets
6. Poor credit arrangements
7. Personal use of business funds
8. Unexpected growth
Gustav Berle adds two more reasons in The Do It Yourself Business Book:
9. Competition
10. Low sales

These figures are not meant to scare you, but to prepare you for the rocky path ahead. Underestimating the difficulty of starting a business is one of the biggest obstacles entrepreneurs face.
However, success can be yours if you are patient, willing to work hard, and take all the necessary steps.
The alternative to NOT facing these challenges is to keep your day job, but as most of you would already have experienced, this also comes with its own problems.
Very often, small first time small business owners take the plunge out of sheer frustration with their jobs or bosses or both.
When the "need" to jump ship overwhelms you, you are easy prey for all the marketing hype about how easy it is to "be your own boss" enjoying the "leisurely life" of working at home. Caught between the stresses of unreasonable deadlines, daily briefings with unpleasant bosses and the uncertainty of keeping your job, it is easy to want to start your own small business in search of greener pastures.
Eventhough it is a small business, it IS still a business and you NEED to take time to plan.

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