There were about 146,000 business startups a year and an average of 12,000 business bankruptcies per year from 2010 to 2019 in the United States. A 2020 Statistics study on small business failure rates: How Long Do Small Businesses Survive? found that the first few years were critical. While almost three-quarters of small business startups survive the first year, less than one-third of micro-companies (less than five employees) were in business after five years. These statistics by themselves may be of little value to you directly. We know how many small businesses survive and for how long, but it ís far more important to know why some survive and others do not. There are a lot of studies on small business failure. Search for small business failures with quotations on Google will give you almost 700 results (about 38 million without!). ‘Why small businesses fail’ will give you almost a thousand. The study found the major internal factors of small business failure was management deficiency, financial management problems, and poor marketing. The Small Business Administration study of Financial Difficulties of Small Businesses and Reasons for Their Failure found several causes of small business bankruptcy: outside business conditions (38.5%), financing (28%), inside business conditions (27.1%), taxes (20%), disputes (18.8%), personal calamities and other (32.9%).

There is a wealth of information on this subject, but what are the common factors? There are four basic areas:

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External Factors That Are Out Of Your Control

External factors include new competition, your major client moving out of town, poor weather if you’re a seasonal business or economic downturns.  They’re often largely out of our control and may be unique to your particular company, but there are often ways to mitigate them. For example, if you have a seasonal business, such as a landscaping company (at least up in the cold north it’s seasonal) you could buy a bobcat to provide income during your off-season with snow removal.  The bottom line is, have a contingency plan for external factors that could have a negative impact on your small business success.

Lack of Managing Your Business

Big companies have the luxury of being able to hire several people to get all the jobs done that need to be done, but chances are you’re going to have to do it all yourself, at least for a while.  That means you’re not only going to have to develop your product or service, you’re also going to have to make financial, accounting, legal, marketing, human resources, and purchasing decisions. You may do some of these tasks very well, but it’s unlikely that you do all these tasks well, and even if you do, you might want to contact a lawyer and an accountant at the very least.  Also, research, research, and research some more, and when you are done researching, find an expert or two to bounce ideas off and give you solid advice. 

Failure To Plan The Direction Your Business Will Go

Small businesses often fail because of a lack of planning.  Let me make a bold statement: the single-most vital part of your business success is your business plan.  Why? Simply put, your business plan specifically and concretely lists your goals for the next few years. It spells out, step by step, how you’re going to meet those goals, and gives you something to measure your performance against at the end of your business year.  Finally, a complete business plan helps you get financing and includes a marketing plan. I have one more thing to say about business plans.  It does very little good to write a business plan, put it in a drawer, and never look at it again.  That same Statistics study we talked about earlier found that successful small business owners refer to and revise their business plans as often as every quarter.

Lack of Strategic Marketing For Your Business 

Most small businesses seem to think it takes a lot of money to market their product or service effectively.  That’s simply not true. There are many ways to market inexpensively. You could use direct mail marketing which is as cheap as a stamp and an envelope, or email marketing, which costs nothing. Not to mention with today’s technology-driven world leveraging social media and even video marketing via YouTube. How about even a simple blog that is posted to your small-businesses website. The point is, you need to get your product or service “out there” somehow.  You may have the best product or service out there, something completely unique from anything else, but what good does that do if nobody knows about it?   

So There You Have It

This is why Every Small Business Will Fail When They Ignore These Four Items, and how you can avoid becoming a small business failure statistic by developing a contingency plan, consulting with experts, and developing and using a business and marketing plan. If you are thinking of starting a small business or currently run one, I’m not trying to discourage you. I sincerely believe being in business for yourself may possibly be the most rewarding career there is, but a little knowledge can go a long way towards arming you against small business failure. If you’re currently running a small business or plan to start one and would like to see how we help business owners like you grow their revenue by $10-50k in 45 minutes or less without doing expensive paid advertising. Simply visit our website at www.TopResultsConsulting.com and book a complimentary strategy session today. Or you can download our free book full of step by step information on how you can take immediate action. 

Until next time. Here’s to your success!