Reasons Small Businesses Fail | Richard Banks & Associates, P.C.

When people decide to start their own business, failing is typically one of the furthest thoughts from their mind, despite the fact that our team at Richard Banks & Associates, P.C. knows there are many reasons as to how it can happen. Did you know that according to the SBA Office of Advocacy, two-thirds of business with employees make it at least two years and only half survive at least five years?

Before starting your own small business, take some time to do your research and have some contingency plans ready and waiting so that you are prepared for all possibilities.

Here are some of the top reasons as to why businesses fail:

1. Starting for the wrong reason. It’s natural to want to be your own boss, but just because you are skilled in your trade won’t always translate to being smart in business. If handling the business side of things, from the good to the bad, isn’t something that you can be excited about, it might be smart to hold off on that particular business venture for the moment. Educate yourself on all the aspects included in business ownership and truly evaluate if it’s right for you.

2. Insufficient capital: Money doesn’t grow on trees, and your business venture will not be able to get started or survive without the almighty dollar. Don’t make the mistake of relying on credit cards to see you through, like how 21 percent of U.S. entrepreneurs have. Not having enough capital is a dangerous option—and one that is never suggested!

3. Improper planning: Have you written out a business plan? Have you taken the time to revise and rewrite that business plan? Do you have contingencies in place for a myriad of situations that your business can find itself in? If you answered no to any of these questions, chances are you have improperly planned your business venture.

4. Expanding too quickly: Expanding is a great thing for any business, but if it happens too soon you could catch yourself unprepared to handle the new, tougher challenges that await. Expanding too quickly could put a strain on your employees and yourself and stretch your resources much too thin.

No business owner branches out on their own expecting the business to fail, but Richard Banks & Associates understands that even the best laid plans can fall through. If your business is struggling, contact us to see what your Chapter 11 options are.