Explain Why Most Small Business Fail Within 2 to 10 Years
Explain why most small businesses fail within 2 to 10 years
While small businesses benefit the economy by creating new jobs, new industries, and various innovations, small businesses are much more likely to fail than large businesses, especially during economic downturns. Why? Because of management shortcomings, inadequate financing, and difficulty dealing with government regulations. These issues—quality and depth of management, availability of financing, and ability to wade through government rules and requirements—are so important that small businesses with major deficiencies in one or more of these areas may find themselves in bankruptcy proceedings.
-------------------------------------------------
Almost one new business in three will permanently close within two years of opening, half will close within four years, and 62 percent will fail within the first six years of operation. By the tenth year, 82 of every 100 businesses will have failed. Although highly motivated and well-trained business owner-managers can overcome these potential problems, they should thoroughly analyze whether one or more of these problems may threaten the business before deciding to launch a new company.
Management Shortcomings
Among the most common causes of a small-business failure is inadequate management. Business founders often possess great strengths in specific areas such as marketing or interpersonal relations, but they may suffer from hopeless deficiencies in others such as finance, or order fulfillment. Large firms recruit specialists trained to manage individual functions; small businesses frequently rely on small staffs who must be adept at a variety of skills. Owners of small service businesses find that they must concentrate on their most profitable customers and even “fire” customers who don’t contribute to the bottom line, as the “Business Etiquette” feature discusses. An even worse result occurs when people go into business with little, if any,
While small businesses benefit the economy by creating new jobs, new industries, and various innovations, small businesses are much more likely to fail than large businesses, especially during economic downturns. Why? Because of management shortcomings, inadequate financing, and difficulty dealing with government regulations. These issues—quality and depth of management, availability of financing, and ability to wade through government rules and requirements—are so important that small businesses with major deficiencies in one or more of these areas may find themselves in bankruptcy proceedings.
-------------------------------------------------
Almost one new business in three will permanently close within two years of opening, half will close within four years, and 62 percent will fail within the first six years of operation. By the tenth year, 82 of every 100 businesses will have failed. Although highly motivated and well-trained business owner-managers can overcome these potential problems, they should thoroughly analyze whether one or more of these problems may threaten the business before deciding to launch a new company.
Management Shortcomings
Among the most common causes of a small-business failure is inadequate management. Business founders often possess great strengths in specific areas such as marketing or interpersonal relations, but they may suffer from hopeless deficiencies in others such as finance, or order fulfillment. Large firms recruit specialists trained to manage individual functions; small businesses frequently rely on small staffs who must be adept at a variety of skills. Owners of small service businesses find that they must concentrate on their most profitable customers and even “fire” customers who don’t contribute to the bottom line, as the “Business Etiquette” feature discusses. An even worse result occurs when people go into business with little, if any,