Why many of the small businesses never expand and fail? inkentikburlu

Why many of the small businesses never expand and fail?

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Every company has its own goals and vision. We can all agree that expanding locally or globally every business owner’s wish. But why some small businesses expand while others never do?

Most of the small business fail before those start running. It may take months for a small business to earn money. Many business can not survive so long.

Why many of the small businesses never expand and fail?

Opening a company is never an easy task. Especially nowadays, when the market is so competitive, having the right idea at the right time is almost impossible. However, let’s say you opened a business a few months ago and it is still a small start-up that wants to grow. Statistics show that over 90% of start-ups fail at the first 18 months, read it again – almost all fail with more than a year life span.

For all the reasons that people can list about why small businesses fail, I think that there are fundamentally only two:

Lack of Profitability: Not generating sufficient revenue in excess of the expenses paid to achieve that revenue and

Insufficient cashflow: Not being able to pay your bills when they became due for payment.

 

Did you know that 1/5 of small businesses fail in the first year and half of the business establishments fail within five years?

Here are several reasons:

  1. Lack of capital– not having sufficient capital to obtain key infrastructure (such as: plant and equipment) by inception; and having sufficient cash flow to fund the day-to-day operations.
  2. Expanding too soon– sudden expansion of their business into another geographic location that stretches logistic capabilities and dramatically increases overhead expenditure.
  3. Heavy reliance on debt funding: Debt payments are now cemented in time and you need your business to get to the Break-Even Point (BEP) as fast as possible. Not achieving your BEP or, not achieving your ‘critical mass’ (some people prefer to use the term ‘scale’) in time, may mean further borrowings to keep your small business afloat.
  4. Poor strategic management:Small business owners maybe great (if not fantastic) at their particular trade, they are not groomed nor educated for business. Business is its own wild animal. One wrong move and it can eat you alive.
  5. No business plan:Planning your business forces you to seriously think about all areas of your business and not just the fluffy parts of your business like “sales” or “profit“. Meticulous details like: operations, employee ramp-up, funding and forecast financials and logistics are needed to be considered.
  6.  No Website and No Social Media Presence: Simply put, if you have a business today, you need a website and a social media presence.
  7. Poor implementation / Mentality: A lot of people think it’s easy and a quick fix to making money. Creating a company, regardless of what it is, takes a MASSIVE toll on you, your free time and most of the time on your sanity. There are so many ‘tests of faith”; whilst starting a business. If you’re not ready to take the highs and the lows, you’ll find yourself ready to quit!

 

Tip: The successful entrepreneurs think not just about the product but about the implementation too.

 

“In business it doesn’t matter whether you win or lose, what really matters is whether you survive.”

Inkenti Kaburlu

 

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