Inside Small Business | Small Business & Home Business Marketing

What are the statistics with small business failure? Should I stick with my day job?

You are definitely correct in saying that so many small businesses fail. According to a report conducted in an issue of USA Today, the statistical failure rate of small businesses is as follows:

- First year: 85%
- Second: 70%
- Third: 62%
- Fourth: 55%
- Fifth: 50%
- Sixth: 47%
- Seventh: 44%
- Eighth: 41%
- Ninth: 38%
- Tenth: 35%

My brother and I have taken the time to examine closely the reasons why they fail and have come up with a list of the top three reasons.

The majority of reports and studies that we have researched indicate that the main reason a small business fails is improper expectations and lack of planning. After looking more deeply into these reports, there seemed to be three critical areas of planning that are quite often underestimated and therefore overlooked:

1. Proper financial requirements to get the business started and to keep it operational.

2. A focus on marketing and developing the business, which are what grow the revenue.

3. Managing and controlling growth.

What can be done to help your business from becoming one of the dreaded statistics? Misjudgment of the start-up and operating requirements of a business is the number-one reason for small business failure. Why? Sales are typically overestimated while expenses are typically underestimated. To assist you with estimating business expenses, creating revenue streams, and managing the growth of your business, try following these steps to help you better prepare:

1. Talk to other small business owners about the start-up stage and ask a lot of questions.
2. Join some networking groups (both online and offline) like your local chamber of commerce.
3. Try and find a small business accounting firm that can help you get your books in proper order from the start of your business to avoid any unwanted pitfalls.
4. Create a thorough business plan and make sure you overestimate your expenses, because something always seems left out of the budget during the planning stages.
5. Identify your potential customers’ needs and give them a reason as to why they should do business with you.
6. Look for strategic partnerships with established companies that already have a client base that could be interested in your product or service, but find companies that do not compete directly with you. Identify some solid ways in which they can benefit from a joint venture with your new company.
7. Ensuring that you have access to enough capital to keep you going through the controlled growth stages will allow you to hire assistance and keep you focused on your core competencies, which should be growing the business.

As long as you have a viable product or service that you have thoroughly researched and you have confirmed that there is a want or a need for it, you have the potential to be extremely successful. Always remember to educate yourself on your business and ensure you have a solid marketing plan, a quality sales team, and realistic growth, and you should be quickly on your pathway to success.

Now, ask yourself: Are you ready to make the transition from employee to employer?

Young Entrepreneur Small Business Forum

Posted on Wednesday, June 11th, 2008 at 1:28 pm and is filed under Boardroom, Entrepreneurial, Expert, Finance, Small Business. You can follow any responses to this entry through the RSS 2.0 feed.