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ENDING SMALL BUSINESS FAILURE

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You are here: Home / Become Your Own Boss Tips / 8 Reasons Why Small Businesses Fail

8 Reasons Why Small Businesses Fail

March 11, 2013 By Melinda Emerson 13 Comments

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Reasons Why Small Businesses FailThe saddest thing in the world to me is to drive down a main street in a small town and see “going out of business” or “for rent” signs in the windows of retail spaces. The last few years in business have been tough, but many of the business failures out there are largely preventable.  The thing I know about business, is that you must figure out what you don’t know about business to survive.  Here are the 8 most common reasons why small businesses fail.

1)     No clue about how hard it is to run a business– People start small businesses for many reasons. They hate their job, need some side money or always wanted to open a shoe store or cupcake shop. The trouble is that too many people do not take the time to really think about what their life would be like as an entrepreneur. It’s a tough lifestyle, at first. Think about what you want out of life first, and then build a business that supports your personal and professional goals.  Develop a life plan because you do not want to start a business that is NOT a good business for you.

2)     No network– “Your network is your net worth.”  You must spend time cultivating the market to develop and nurture your professional and personal connections. Your first customers will come from your personal network. If you have no network, your business will not be able to survive.

3)     Not saving enough money- If you don’t save enough money before you start your business, you may not be able to hang in there until the business can generate any real revenue. People with assets have options. It takes on average 12-18 months to break even in a new business, let alone replace your corporate salary.

4)     Lack of a niche focus– Too many small business owners sell to anyone they think has money. Take the time to develop a well-defined niche for your business. It is so much easier to develop a marketing plan when you are clear on your target. By the way, specialists can always charge more money.

5)     No marketing plan- Too many small business live off referrals, which is good, but that eventually will dry up. You must put some effort each day into generating sales for your small business. You can make a call, send an email, write a blog post, and ask for a testimonial on LinkedIn from a happy new client. Do not rest on your reputation. Actively let the world know you are open for business.

6)    Not managing your brand online– It’s now easier than ever to build a brand online. It’s also just as easy to damage your business brand. Do you have a good, helpful website? Do you Google yourself and your business monthly? Do your social media accounts tell people how to hire you? Do you have a blog that hasn’t been updated in six months to a year? Do you have bad reviews online that you have not responded to? Can your website be seen easily from a mobile device? People will search for your company online before they ever call you, what would they find about your business today?

7)    Not communicating with existing customers- It’s cheaper to keep a customer than to go out and get a new one. You must have a database, CRM system and email marketing program to communicate with your customers so that they know all the ways they can work with you. At least monthly, your customers should hear from you.

8)    Lack of fiscal discipline– If you do not run your household with a budget, you won’t run your business with one.  You must make business decisions based on up-to-date financial information. Know your latest numbers by the 15th of every month. Ask yourself “Why” three times before making a purchasing decision for your business.

Do you have any other reasons why small businesses fail?

“Failed Stamp Showing Reject” image courtesy of Stuart Miles / www.FreeDigitalPhotos.net

 

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Filed Under: Become Your Own Boss Tips, How to Start Tagged With: business failure, business planning, entrepreneur

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About Melinda Emerson

Melinda F. Emerson, “SmallBizLady” is America’s #1 Small Business Expert. She is an internationally renowned keynote speaker on small business development, social selling, and online marketing strategy. As CEO of Quintessence Group, her Philadelphia-based marketing consulting firm serves Fortune 500 brands that target the small business market. Clients include Amazon, Adobe, Verizon, VISA, Google, FedEx, Chase, American Express, The Hartford, and Pitney Bowes. She also has an online school, www.smallbizladyuniversity.com, that teaches people online marketing and how to start and grow a successful small business and publishes a blog SucceedAsYourOwnBoss.com. Her advice is widely read, reaching more than 3 million entrepreneurs each week online. She hosts The Smallbizchat Podcast and is the bestselling author of Become Your Own Boss in 12 Months, Revised and Expanded, and Fix Your Business, a 90 Day Plan to Get Back Your Life and Reduce Chaos in Your Business.

Comments

  1. Peggyz Place says

    March 11, 2013 at 10:05 am

    All very true. Another reason is lack of discipline. Some small business owners think that because they own the business, they can get there anytime they want. Which is so wrong. If it was paid employment ,would you get to work anytime you want?

    Reply
    • Kevin Montgomery says

      March 13, 2013 at 9:56 am

      Hello! I enjoyed what I read and agree! This is my business that I have but want your opinion. I do this for a living I’m excited about it and ask that You check it out and reply back to me honestly! If you like what You see and hear LOL pass it on people laughed at me when I told them I was texting famous people they said they want never text you back! But it didn’t deture me! Determined to win big!!! This my site WWW.kevinandsheliatravel.dreamtripslife.com Thanks in Advance

      Reply
  2. Dee Copeland Patience says

    March 11, 2013 at 1:27 pm

    Very actionable steps here! I recently set up Freshbooks and it’s a life saver. Xero is another great option, but was harder for me to complete.

    Freshbooks has easy reports to show you exactly where money is going and you can even bill up to three clients for free. It’s a great option for smaller or solo business owners just getting started.

    Reply
  3. Saniah Johnson says

    March 11, 2013 at 11:56 pm

    Great insights into why businesses fail! I would add to your list, failing to invest in resources when needed. No one expects you to be capable of doing everything. Know when to hire qualifed professionals to assist you with that great marketing plan, financials, or other skills to help your business grow.

    Reply
  4. Mary Habres says

    March 12, 2013 at 6:21 pm

    Another reason businesses fail is lack of organization – no procedures or systems in place to operate the business efficiently and effectively.

    Reply
  5. Ebunoluwa Oyebade says

    March 15, 2013 at 9:36 am

    Another reason businesses fail is the greed mentality. Many open businesses thinking they will ‘hammer or hit’ the millions sooner. They do not realize that it takes your BLOOD to make the millions. In short, been in business is HARDWORK!

    Reply
    • allen says

      June 7, 2013 at 6:35 am

      i agree!

      Reply
  6. Agnes says

    May 10, 2013 at 8:31 am

    Hello there! I know this is kinda off topic however , I’d figured I’d ask.
    Would you be interested in trading links or maybe guest writing a blog article or vice-versa?
    My website addresses a lot of the same topics as yours and I feel we could greatly benefit from each other.
    If you’re interested feel free to send me an email. I look forward to hearing from you! Superb blog by the way!

    Reply

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