Are You Ready? l FAQ l Risk Management Checklist l Why Businesses Fail l Planning Questions l Business Owner Job Description l Form An Advisory Team l Test Your Business Idea l Personal Financial Assessment
Reasons Why Businesses Fail
We all know that many businesses fail. To increase your chances of success, you’ll want to honestly assess your business — or business plan — and look for ways to build on strengths and counteract weaknesses.
Avoid these common business pitfalls. These tips will help you plan for your success.
Your business is not making a profit.
You can’t succeed if your expenses are higher than your income.
TIP: Know all of your real costs. Keep expenses low and be sure to cover your costs.
You don’t understand your customer’s buying habits.
If you don’t know who or where your customers are, or what motivates them to support your business, you risk losing your customers.
TIP: Talk with your customers. Get feedback, find out what is working and not working. Research potential customers.
You think you can do it all on your own.
Doing it all on your own is one of the fastest ways to burn out and sabotage your new business.
TIP: Know when you need help — whether outsourcing, a consultant or technical assistance — and ask for it.
Your business is growing too fast.
While growth in business is generally a good thing, too much growth too quickly can sink your business.
TIP: Remember not to take on more than you can handle or afford. It takes resources – money, inventory and staff – to meet increasing demand.
You depend too heavily on one customer.
Relying too heavily on one customer – no matter how big or lucrative – is setting yourself up for failure if you lose that customer.
TIP: The more customers you have the better your chances of business survival.
You’re pricing the product/service too low.
You must cover your expenses if you want your business to survive.
TIP: Know your costs and price your product or service accordingly.
You start out without enough cash.
Plan for the start-up costs. You may have to pay up-front for goods and services and you will probably be waiting for money to come back in.
TIP: Make sure to have available enough cash or access to credit.
You are unwilling to react to competition, changes in technology, or changes in the market.
In order to survive – and thrive – businesses must react to changes in the market, technology and competition.
TIP: Don’t be afraid to experiment and change with the times. Networking, doing research or taking classes can make changes easier and more positive.
Download Reasons Why Businesses Fail as a PDF.
Plan for success by:
KEEPING GOOD RECORDS
Use QuickBooks or some other bookkeeping program to help manage your cash flow. Bookkeeping software – and the proper training – can help you categorize expenses, run cash flow, payroll and analysis reports and even estimate break-even and profit timelines.
BUDGETING FOR UNEXPECTED EXPENSES
Equipment failures, tax hikes and cost increases are bound to happen. Plan for these unexpected expenses so you don’t fall behind. It’s a good idea to have enough cash reserves to cover 45 days of ordinary business expenses.
- Are my business goals well thought out, written and measurable?
- Have I communicated those goals with everyone involved in the business?
- Do I know which risks will keep me from reaching the business goals?
- Have I scheduled regular Insurance check-ups for health, life, property, and disability?
- Will my lender understand the business plan and help me achieve its objectives?
- Are all business assets covered by risk management coverage?
- Do I know what financial records I need to manage the business?
- Do I understand the term and conditions of loan arrangements?
- Do I have an alternative source of income?
- Do I have a will? When was it last reviewed and updated?
- Does my family know where my will and other important documents are located?
Download the Risk Management Checklist as a PDF.