Understand Why small business often fall apart

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On November 11, 2014, Posted by , In Business, By , With No Comments

Owning your own business is a prolific version of the American dream. It means that you’re financially self-reliant. You set your own hours, you do the thing that you love and you don’t have to answer to a boss if you don’t want to. Sometimes this dream can manage to turn into a nightmare, and a large majority of small businesses fall apart before they ever have the chance to get off the ground. Why do small business owners often find themselves on the brink of disaster? What causes these small businesses to fall to pieces, and what can be done to make this nightmare go away? When it comes to reasons for failure or success, several factors can influence the opportunity for success and push the chances one way or the other.

Reason 1: Overwhelming Growth

When a small business fails, one of the saddest reasons for the failure is that the business owner is unable to handle skyrocketing growth, and they were ultimately unprepared for their business to take off. Everyone wants their business to succeed, but not many business owners plan or predict a huge increase in demand. If you over-expand your business too soon or move into areas that are less profitable, it unbalances the entire business plan and ultimately sets you up for failure.

Reason 2: Crunching the Numbers Incorrectly

Not all small business owners are expert accountants. Most of the time a small business owner is someone with a passion, which means that they don’t keep as close of an eye on the numbers game as they ultimately should. If you are unaware of what’s happening behind the scenes of your business and you simply cannot reconcile the profits with the expenses, your business is going to come crashing down – even if everything otherwise points to a profitable and stable growth.

Reason 3: Little to No Backup Planning

The crash of the economy taught a lot of small business owners an important but ultimately disastrous lesson. If the cash flow stops rolling in, you have to have a backup plan, or your business is left with no leg to stand on. It’s absolutely imperative for small business owners to have a reserve of money on-hand in case things slow down. A lot of small business owners find themselves with no equitable cash backup and their ability to borrow money in lieu of a crunch may mean that their doors are going to inevitably close for good.

Reason 4: Poor Planning – or No Planning at All

A lot of successful entrepreneurs get a great idea and hit the ground running. For a time, following this course of action seems profitable, but without the stability of a workable and sustainable business plan, this success is ultimately temporary. While it is impossible to plan for every single possible disaster, it is important to define (in writing) the owners ideas and how certain situations will be handled while keeping an eye on growth and potential expansion.

Owning a small business is not easy, especially in today’s market. Planning, having a backup plan and being prepared for whatever comes your way are essential ingredients to overall success and can allow small business owners to ride out potential crisis and maintain their footing in a shaky and unpredictable economic world. If you simply try to take things as their come with no definitive direction or goal, however, you’re more than likely going to find yourself on a sinking ship – with little to no hope of recovery.

Introducing information technology to your business will help your competitive edge in growing your business and reaching more people in less time.

 

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