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On today’s Business Beat, Jeff discusses the top reasons that businesses fail, as found from a study by CB Insights.
Tune in to the Business Beat, below, to learn more about why small businesses fail:
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Good morning, Paul!
Today’s Business Beat is presented by Digital Resource. We know well that a significant percentage of small businesses fail. Look, starting a small business and making it successful is hard. So many bases to cover, so many challenges to overcome, so many critical objectives that must be achieved.
And all of it in a weakest link equation. You can do 99% of everything, right, and still fail. Really? Yep. Why and how can this be? Well, our friends at CB Insights have just released a report listing the top reasons that businesses fail. Let’s take a look.
Let’s start at number three, 20% failed because they were outcompeted. My take on this failure reason: you can’t let this happen. Are you really going to let somebody out-compete you when you’ve got your life, time, energy, and money on the line? This is your small business dream, don’t let someone else get there first.
Number two: 35% of failures occurred because there wasn’t really a market for the product or service offered by the business. Well, now that one has me amazed. You mean a third of business failures occur because people didn’t do their research like focus studies before starting their business to make sure there was a market for what it is they propose to sell? Sounds to me like these entrepreneurs simply deserve to fail.
And the number one reason businesses fail: well, 38% have failed because they ran out of money. Well, look, this is a tough one, but before you launch your business, make sure you do financial projections. Make sure you understand the capital needs of your business and understand when you’re likely to reach, break even, and more important, make sure you understand when you’ll have revenues that will support the business going forward rather than requiring that you or third parties invest or loan money to the business to keep it alive. With proper forecasting, you can put yourself in a much better position to avoid failure due to running out of cash. Our bottom line, do your homework before you start. If you do, your odds of success will go way up.
I’m Jeff Sloan, founder and CEO of StartupNation.com, and that’s today’s Business Beat, today brought to you by Dell technologies on the Great Voice of the Great Lakes, WJR.