Data from the BLS shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.
The most common reasons small businesses fail is due to the following: lack of capital/or funding, unsuccessful marketing initiatives, lack of planning, leadership failure, ignoring customer needs, inability to learn from failure, poor management, poor location, and even a bad business partner and there are still more.
For starters, most people start a business thinking they will become rich quickly, so they have no backup plan to keep the business afloat. I have been called to businesses where they want to advertise but don’t have a budget for advertising or they think if they advertise just one month people are going to come running to their business and don’t understand anything about the consistency of advertising. Many people think that they will have more time for their family, or they think they will make their own shorter hours. And while all of these things may happen, normally they require some work and effort for a longer period of time, and this can put a strain on the business owner and their family.
However, the one that I heard one too many times and drives me nuts is, “I thought my friends were going to support me.” I must say if are opening a business depending on your friends then you should be rethinking your entire business plan and your mission. Keep in mind once the honeymoon phase dies your business will fail.
Then there are people who open a business that they know nothing about. You should start a business first in a field that you love and do your research. I state this as many will start a business that they feel will make them money but one that they dislike, believe me, this usually ends badly. You should be enthusiastic about the business that you will be opening and do all your homework.
What about location, location, location. Everyone knows that location is key to a business. Even a well-seasoned company can fail due to a bad location. And lastly don’t forget there are plenty of businesses that sell your same product, therefore, you must offer something that stands out, and most of the time what stands out is simply good customer service.
Rosa Julia Parra
