Reasons Why New Businesses Fail In The First Five Years.


It’s often said that more than half of new businesses fail during the first year. According to the Small Business Association (SBA), this isn’t necessarily true. The SBA states that only 30% of new businesses fail during the first two years of being open, 50% during the first five years and 66% during the first 10. 

Location, Online Presence and Marketing.

A bad location is self-explanatory if your business relies on location for foot traffic. Just as dangerous, however, is internet presence. These days, your location on the internet and your social media presence can be just as important as your company’s physical presence in a shopping district. Online presence will let people know that they can give you their business, so if the need is already there, the availability and visibility of your business is the next important step. 

Too Little Financing.

If you have started a company and things aren’t working out, you’ve got little capital and a struggling business; you’re really not in a good position to ask for another loan. Be realistic at the beginning, and start with enough money that will last you to the point where you’re business is up and running, and cash is actually flowing in. 

Managing Everything On Your Own.

Small business owners generally are passionate about their businesses, so they tend to do everything on their own. This is a frequent occurrence that shouldn’t be. I know you started off handling everything alone from getting leads, follow-ups advertising, accounting, and all the necessary paperwork.

However this isn’t a cool idea because you don’t get to learn delegation and outsourcing which are very important skills in business also you won’t be able to grow and bring in new ideas.

Not Understanding Profit and Cashflow.

This is one major mistake most small business owners keep on making. You have to know the difference between these two in order to succeed. Your cash flow, in layman term, are those funds that come in and go out of your business as a result of running the business and other financial activities. Your profit, on the other hand, is what remains after you have removed your expenses. You have to bear it in mind that even a profitable business can still go broke.

Not Setting Business Finance Asides From Personal Finance.

This is one easy way to mess up your business finances. It is advisable to open a business bank account before starting your business. Make sure that all income and expenditures are transacted through your business account. Even when you still pay for expenditures out of your own pocket, please ensure that accurate records are kept. Keeping your personal and business records and accounts separate is very essential as it ensures a pain-free record keeping.