Within their first 10 years, roughly 70% of small businesses fail, and this can be due to many reasons. This is consistent across the economic scenarios that have presented themselves over the past few decades, but why?
Not Understanding Personal Strengths and Weaknesses
If you want to start a business, you need to have a clear picture of which types of concepts and tasks you excel at — and those you don’t. You don’t want to pursue a path that doesn’t complement your talents, so before you make any big moves, take a self-assessment quiz. These tests can show you where your strengths and weaknesses lie so you can set your business venture up for success.
Choosing the Wrong Type of Business Entity
The type of business entity you choose can be crucial to your success. Many people settle for sole proprietorships or partnerships, but to reduce the risk of liability, they may be better off incorporating or setting the business up as an LLC. However, each state is different, so check with a professional as to which one may be a better fit.
Relying on Friends and Family
Business is business, and friendship is friendship. In some cases, the two can be mixed, but relying on friends or family can result in your business going bust. It can be hard to pursue debts and manage employees who are friends or family members. If you do decide to go down this route, you need to prioritize the needs of the business if someone isn't working out.
Running a business with parents can be particularly demanding. Managing this is vital to success, and many businesses do it. Around 90% of all business enterprises in North America are family-owned.
Naivete Plays a Part
A lot of small business owners simply jump into a venture without completely understanding how to run a business. They have an idea, and they have the enthusiasm. However, they don’t always have the training required to have a holistic idea of how accounts, staff management, customer management, and other factors all play a part in successfully running a small business.
If this sounds like you, you may wish to consider an advanced degree, such as an online MBA program. These can help you develop an understanding of corporate finance, marketing, strategic planning, and even research and statistics. If you take online courses, you can even balance family life, work, and school.
Trying to Do Too Much
As a small business owner, you'll likely be tempted to try to do most of the work yourself to save money. This can be viable at first, but many people quickly burn out after the first year if they take this path.
The trick is to learn to delegate to reduce the amount of stress on yourself. You also train people to work the business so you can take a break. In addition, there are some tasks that will take a lot longer for you to do yourself than for an accountant or administrative professional.
Failure to Pivot
Many businesses fail because they don’t react to changing times. If you have a restaurant, it can be tempting to stay the course, but there are times when you need to change it up. If there simply isn’t a market for one type of food, you may find success with another.
Or if you still aren’t taking payments via your website, it’s time to add this beneficial convenience for your customers. Simply choose a preferred payment processing method, then use a third-party bank account verification API so your customers’ accounts remain secure.
Keeping Your Small Business Running
Avoiding these pitfalls can be tricky, but you can keep your small business running through perseverance and continuous learning. Understand your strengths, keep up with current thinking, perform regular research on your local market, and ensure you have the skills or the people with those skills in place to reduce the pressure on you.
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