In over 35 years of assisting new business startups, along with starting and running several businesses, I have found that most small business failures are due to 5 simple reasons.
1) You’re going to work more than 9-5.
Failure of the business owner to understand that he or she is no longer an employee, they are an owner. New business owners should expect to work more and harder than they ever worked as an employee.
2) Failure to utilize resources.
Failure to understand and learn about the things you don’t know by using the proper resources. These resources include accountants, attorneys, insurance agents, and other experts that can help properly set-up your business and ensure that you have the knowledge to prevent one customer, vendor, tax or regulatory mistake from ending your business.
3) Failure to keep control of cash and cash flow.
I have seen more than one business fail because the owner thought a big contract or job would make them rich and instead it tied up all their cash and put them out of business. It’s important to keep control over accounts receivable and never allow any customer to owe you more than your business can afford to lose. It is important to understand benefits for owners and employees come after cash flow. Programs like health insurance, pensions, and other perks are great when a business has the cash flow to support them however, they are a drain on resources for most small business startups.
4) Failure to properly plan financially.
Many entrepreneurs fail to understand and prepare for the amount of time and money it will take for a new business to reach a break-even point, let alone be profitable enough for you to receive the kind of compensation you walked away from to start your own business.
5) Spousal support matters.
This is not about how much money your significant other makes or puts in, it’s all about the support you get at home when it comes to working long hours that don’t always produce extra income. All too often new business clients come to me because they are afraid to share the problems they are having getting their business off the ground with their life partner. If your significant other does not support you it’s ten times harder to be successful.