5 Reasons Small Businesses Fail


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Most small businesses don’t make it. There are a lot of factors that come into play as to why a business doesn’t work. Whatever the reason, you can bet that they did at least one of these five points if not all of them. So let’s put the odds of success back in your favor.

1. The Product Isn’t Good

If you don’t have a good product, you’re not going to be in business very long. It doesn’t matter how great you are everywhere else. People aren’t going to come back for something that’s bad. You want returning business. And I don’t know about you, but I can’t promote something if I don’t believe in it. The product should be so good that it essentially sells itself.

Example: I used to go to a seafood restaurant and the service was horrible. It took them a long time to give you your food. Their turn over rate was high, so it was always a new waitress that didn’t know what they were doing. But you know what, I kept going back because the food was so good!

The food was so good that everyone kept coming back and they overlooked the bad service. That right there should tell you how powerful a good product can be. I’ve even seen places with a good product that were not in a convenient location. But you know what, people were willing to make that long drive to the store, because they had a great product.

2. They Don’t Keep It Simple

Know what you do and do it extremely well. If your restaurant sells chicken, burgers, pizzas and tacos, you’re not keeping it simple.

Example: You make a restaurant that only focuses on chicken strips. Your business now has an identity. It’s the restaurant that’s known for chicken. So when a family is wondering what they want to eat for lunch and someone mentions chicken, they think of you.

Another reason why you want to keep it simple is because you want your business to be scalable. A simple business model is way easier to manage than an overly complicated one. You’re just giving yourself more work to do and more opportunities to make critical errors when you don’t keep it simple. Also, by knowing what you do and only doing that, you will save money. Your inventory will be easier to do so you can see where every penny is going.

3. Expenses > Revenue

You can’t spend more than what you bring in. I know that may sound like a no-brainer, but trust me so many people do it. Honestly this is probably why most businesses don’t make it. Either they’re in a rush to grow their business so they start spending a lot of money or they begin to go in debt by owing a lot of money. Don’t do this. If anything, my challenge to you is to spend the least amount of money as possible to get going. Start making some profits and let that money build up before you start spending it. The lower you can make your expenses, the more likely you’ll be able to stay in business.

4. Bad Management

If something doesn’t go right, people are going to look for someone to blame. That should be the people at top because look it’s their job to make sure everything is running smoothly. This one is kind of self explanatory, but you can read my post What Makes a Great Leader if you’re looking for something more in depth about the topic.

5. They Try To Expand Too Soon

Early expansions can lead to a small businesses demise, because this goes right into spending more than what you bring in. I’m not against trying to grow your business, but do it when the pros out weigh the cons and your business is busting at the seams. Don’t look to expand if it’s going to put your business in a bind. However, many rush to this and it back fires. Instead of increasing their profits, they create more expenses. Be patient and play the long term game.

If you avoid these Five Mistakes, you will definitely increase your odds of staying business. Good luck!

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