Research by the U.S. Small Business Administration shows the following top five reasons that start-up companies fail. Make sure that your business does not fall victim to them!
- Insufficient start-up capital. Starting a business with too little capital is a sure recipe for failure. Experts suggest that entrepreneurs have the cash equivalent of 6 months of expenses available.
- Lack of managerial experience. Passion for starting a company is important, but entrepreneurs also should have skills and experience in key business areas such as cash flow management, marketing, financing, inventory control, and others.
- Bad location. Selecting the proper location is a key to success for many businesses. Your location should be convenient for your companyâ€™s target customers.
- Poor inventory control. Entrepreneurs in businesses that carry inventory must manage it closely. Carrying too much inventory ties up valuable cash, which can sink a new business.
- Lack of initial planning. There is a reason that the mantra of many small business counselors is â€œbusiness plan.â€ As you will see in upcoming chapters, creating a comprehensive plan allows entrepreneurs to determine whether a business idea is likely to succeed and to identify the steps they must take to create a successful company.