The advent of Facebook and other successful startup companies has refueled the entrepreneurial spirit in a number of basements, garages, and home offices. Some small businesses go on to become very successful endeavors that reinvent industry; others fail. They fail, according to one small business owner, “not because of the product, but because of the plan.”
According to a group of business owners, here are the most common reasons that businesses fail.
They don’t diversify the leadership team. A successful startup is rarely comprised of all marketers, or all financial planners. “Your initial leadership team needs a healthy balance of diverse skill sets capable of analyzing the business plan from all angles. No balance; no (successful) business!”
They are too focused brick and mortar. According to About.com, none of the top 10 (business) startups in 2012 require brick and mortar. “Though some of them (tutor/pet shop) may have required brick and mortar in the past; they don’t now. Even in an economy where home and business (buildings) sales are not fully recovered; an investment in a building just isn’t worth it.”
They don’t secure investors before talking to the bank. A bank loan should be a last resort! In the past, we needed them (bank loans) for big ticket items like buildings and vehicles; but we don’t now. “This is one area where we can steal a page from politicians. Invite some friends over for cheese and wine, present your business plan and financial projections, and ask for investors. Whether they donate a dollar or ten thousand; you should call them back in six months to update them. They may even be willing to invest again.”
They don’t invest in their success. Some businesses have a successful first year through the support of friends and family. What do they do with that money? “They count that money as profit, and it’s not! It is an investment in and for year two. Spend it at your own peril.”
They don’t keep up with trends. Every new (and old) business should be on the hunt for any feedback that makes them more competitive. “I live on the SBA (Small Business Association) website. It and other trade magazines will provide tons of useful and beneficial information. “
Source: U.S. Small Business Administration