95% of Small Business Fail in the First 5 Years...Why?

By Vincent Scott

We all know the gruesome statistics. Nine out of 10 small companies are doomed before they reach kindergarten age. But why? Why such a ridiculous mortality rate, when most small business owners are passionate, talented, and hard working?

There are no universal answers, but there are some common fatal flaws that most failed small businesses have in common. Read on and see if any of these applies to you. If so, you might want to take a long, hard look at how you run your business.while you still have one.

Common Reasons Small Businesses Fail

• Assuming others will be interested-Many, many small companies bomb because their owners assume that because they find their area of business interesting, so will others. So the antique bicycle fanatic starts a store devoted to, what else, antique bicycles, and finds that no one cares.
• No marketing-One of the biggest pitfalls. I can't count how many small businesses I've seen who think that somehow they'll put up a sign, open their doors and customers will magically appear. It doesn't happen. Without marketing, people will not know you exist.
• Being penny wise and pound foolish-You should spend money on the things that matter for your business. For example, if you're an interior designer, hadn't your office better look like a spread from Architectural Digest, not be furnished with plastic chairs and cheap paneling? Scrimp on the extras, but spend wisely on what you need to make your business appear first-class.
• No Web site-A site used to be optional. Not anymore. So many people cruise the Web to find the products and services they need, from auto repair to gourmet coffee, that not having a site is a huge handicap.
• Not listening to the customer-I know a woman who runs a Jamaican restaurant in my home town. Wonderful food and fabulous, warm atmosphere, but she insists on a fixed, very native Jamaican menu that's too odd for some people, and the service is so "leisurely" that it takes at least two hours to eat dinner there. So despite her great food, she's barely hanging on, because she refuses to change to meet what her customers want.
• No business plan-The saying goes, "No one plans to fail, but they do fail to plan." Few small businesses go into business with a business plan that directs how they'll grow, who their best market will be, where their revenue will come from, and so on. Running a business by the seat of your pants may be adventurous, but most entrepreneurs would rather have security and steady income.
• Not having a war chest-When you start out, you'll struggle. It's a given. So before you go to the expense of leasing space, paying for ads, hiring employees, getting insurance and so on, make sure you have some cash set aside for the lean times, preferably for the first year.
• Copying the competition-It's a natural tendency: you see a competitor who's doing something well, and you do the same. But it's bad business. If a company starts specializing in a certain product or service and bringing in tons of new customers, specializing in the same product or service is exactly the wrong thing to do. The first mover has the advantage. Find something unique you can do instead of reacting to others.