Reasons Small Businesses Fail

Before You Say "I Do"

Before you say I do, before you make the investment, before you hang the sign, before you set up the company, there is something that you should know. Small businesses are similar to a marriage - no one goes into the venture thinking that it won't work out. Yet a significant portion of small businesses fail. According to the Small Business Administration, as many as 30 percent of small business startups fail within the first two years of the honeymoon - and up to 50 percent within the next three years. Do the math and you'll come up with a staggering 80 percent failure rate among small businesses within the first five years. The odds are stacked against you, but our business model is based entirely on helping small business owners maximize growth. To avoid the pitfalls that cause other businesses to fail, you've got to understand what business failure is, the reasons why small businesses fail and what it will take to be part of the remaining 20 percent that achieves success.

Just like someone whose marriage has ended in divorce, failed small business owners often blame anyone but themselves. They look for factors outside their control as scapegoats for the downfall of their business endeavors. They blame the economy, the government, their partners or their employees, just to name a few. If you dig a little deeper, the real root of the problem can often be revealed in a lack of business acumen, inadequate resources or insufficient capital. Without exception, these issues are ultimately the responsibility of the small business owner.

Lack of Business Acumen

Making the transition from an employee to a small business owner can be extremely difficult. The disciplines that you have developed as an employee are totally different than what you will need when you step into the owner's shoes and start running the show. The reality is that many owners' expertise lies in accounting, law, medicine or some other discipline unrelated to day-to-day operational concerns. Don't assume that you can just open a business and find clients or patients lining up outside your door. It takes skill and experience to drive business your way. Identify the areas where you lack expertise and look for consultants, partners, professional services or employees to fill in the gaps.

Inadequate Resources

For small business owners, relationships mean everything. The right relationships result in a strong foundation, but incompatible or incomplete teams translate to inadequate resources. What team resources can you leverage to balance your own strengths and weaknesses? Too often, new business owners attempt to do it all themselves. This strategy may work in a one-man operation for someone whose goal in life is to only work by himself, for himself. Unfortunately, it's an ineffective strategy for running a full-scale business. Instead, you need the right team and the right advisors. One of the most powerful tools you can use to increase your chances of success is to learn where to turn to get the right resources to fit the needs of your business. That won't necessarily mean consulting with your best friend or hiring a former co-worker. Your selection process should extend beyond friends and family. Looking for the lowest price may also not be the best decision-making criteria. The truth is you get what you pay for. Locating and utilizing the best resources possible is one of the keys that will differentiate your future between dissolution and success.

Insufficient capital

The number one reason why marriages fail is because of money issues, and small businesses are no different. The amount of capital available to you at the time you establish your new business is a critical determinant of the success or failure of your business. Simply put, your available capital is the sum of your cash, lines of credit or trade credit for the business. For most start-up businesses, the costs incurred within the first two years far outweigh income - except in the case of acquiring a business that provides income on day one.

One of the largest and most common problems is muddying the line between business expenses and personal expenses. Separate your personal life from the business. Resist the temptation to remove cash from business accounts to satisfy a shortfall in your personal budget. While it's true that the business should provide income to the owner, too-frequent personal withdrawals cause undue hardship. Plan withdrawals that are sufficient to maintain your household needs and stick to the plan.

In order to flourish in business, you must be accountable to yourself, your employees, your family and your clients. You must be able to grow right along with the growth of your business. If, as a small business owner, you take the same "'til death do us part" commitment pledge taken by a newlywed, and commit to sticking it out through thick and thin, you will increase your chances for success. Don't give in to the temptation to wander off and explore the next, newest thing. Focus and commit to your business and eliminate failure as an option.

Business For Sale: How To Make A Sound Investment

The varying business opportunities are the main reasons why the world in general keeps on rising amids economic trials. Tools and resources even makes a business for sale in countries that show the most opportunties a very appealing choice for most investors.

There are a lot of people who will prefer what suits their preference. However, it cannot be avoided that you usually end up on something that you never though of in your wildest imagination. For the sake of earning income, you grab the offer.

If you are eager to look for something that matches your inclination, then you can do so given the right advice and circumstances. Among the best types of business is the tourism industry. Among the many offerings of the place are the coastlines, beaches, breathtaking forested mountains, rivers, lakes - all of which are leading to the richness of the place in terms of natural resources. Wow before the different craft and artisan villages, inspired by the indigenous and European heritage. Surely, you will find the place a must-see. Most business opportunities right now is that they do not usually cater to the personal interest of their owners. Although they are without a doubt profitable, the profits can only sustain as the returns of the investment. But, anything more than the profit itself, as you need to have a pleasurable business, comes in rarely.

You can venture into a restaurant business, the dry goods store or anything that suits the location. You may go for the holiday park for sale. The holiday park will allow you to meet different people at the most unexpected destination. Work will not feel like work with the view you will have access to. At the same time, you can enjoy a lot.

Again, you must give high importance to the location. It has to be where you and your customers can easily meet and transact. It will be easier for you to entice tourists especially if the place is one of the areas near activity centers. Basically, you need to go for a place that will serve as the cover of your website, social media pages, brochures and other promotional items. When searching for a business for sale, you need to think about the location and the opportunities that the different offers come along with. The most beneficial choice should be going for the type of business that will not force you compromise.

Breakeven Analysis: When Can You Expect a Profit

In business, making good decisions is often the difference between success and failure. Do you rely on gut, the numbers or maybe a combination of both? There are a lot of tools to help, but one of my favorites is a breakeven analysis.

What is it? Breakeven analysis is used to determine when you will be able to cover costs and begin to make a profit from your business investments. You may have used it when starting your business to determine how much sales revenue you needed to cover your fixed costs or overhead.

It's helpful before starting a business. It's just as important as your business grows and projections are replaced with reality -- actual numbers. But it's also helpful when making decisions on a variety of issues - Should I:

    Invest in a marketing campaign, website or social media marketing?
    Hire additional staff to support our growth?
    Outsource a project or task to free up my time for important growth initiatives?
    Purchase a new piece of equipment?
    Upgrade our computers or phone systems?
    Invest in technology (ie, CRM system) to support growth?

While ROI is often used for many of these decisions (will I get a return), you can also use a breakeven analysis to answer the question "When will I begin to make a profit from this investment"?

How to calculate. To do a breakeven analysis, you need to know two things -- the cost associated with your investment decision and your gross profit margin (%).

To calculate the breakeven revenue, divide the cost by the gross profit margin percentage. For example, if cost is $5,000 and your margin is 45%, your break-even revenue is $5,000 /.45 or $11,111. In this case, you will begin making a profit when you hit $11,111 in sales.

My clients find it helpful to look at the break-even point from a number of customers perspective too. You can do this if you know (or calculate) the average dollar sale or transaction for your customers. To determine the customer break-even number, simply divide the revenue breakeven (above) by the average transaction amount. Example: If the average customer sale for the above business is $283, the customer breakeven is $11,111 / $283 or 39.3 (40) customers.

Once you calculate the breakeven, it's decision time. Here's a few questions to ask yourself:

    Is the breakeven reasonable and achievable based on the investment you are making?
    If the incremental sales include new customers, what is the potential lifetime value of these new customers? How does this impact your decision?
    How does this investment compare with past initiatives or others you may be considering now? Business is often about trade-offs and priorities.

Knowing when you can expect to see a profit can be a powerful decision making tool. Use a break-even analysis to help you figure it out.

Joan Nowak is a results-oriented business coach, consultant, speaker, radio host and creator of the Hybrid Business Coaching System for small business owners. For additional information and resources to help you grow your business, visit While you are there, subscribe to her monthly eNewsletter for new articles, business tools and special offers.

Employee Firing for Small Business Newbies

Small business owners encounter many legal issues before and after starting their business. One of most stressful legal issues a new business owner may face is how they will deal with a troublesome employee. Job-related lawsuits have risen sharply over the past fifteen years, causing financial devastation for business owners nation wide. Most lawsuits are covered by a business owner's standard business insurance policy. Unfortunately, business insurance does not protect a business owner from being sued by his or her employees.

Employees in the United States have state and federal laws that protect them from being unjustly fired by their employer. There are five smart things new business owners can do to prepare themselves against being sued by an employee that they have to let go.

1. Prepare an Employee Handbook

Using an up to date employee handbook to train your employees not only lets them know what behaviors you expect from them up front but also helps you establish grounds for terminating an employee later on if they do not follow the standards of conduct that you have set forth for your staff.

2. Adopt a Progressive Discipline Policy

Another way to protect yourself against a lawsuit where an employee accuses you of unfair termination charges is to implement and consistently follow a progressive discipline policy. A progressive discipline policy works like this: Each time an employee breaks a rule the employer gives the employee a more serious consequence. Usually employers give out verbal warnings first and then progress to written warnings, then suspensions, and finally termination. This discipline policy not only gives the employer a paper trail of proof relating to the employees wrong doings over time but also allows the employee plenty of time to realize their need for improvement before being terminated.

3. Use Prudence When Breaking the Bad News

It is wise to have a witness present at termination meetings. For example if the store manager has the job of breaking the bad news of termination to the employee, the store owner should attend the meeting and answer any questions the employee may have. When actually delivering the news of termination to the employee stick to the facts, avoid making rude comments or blanket statements, relay only the well-documented, job-related infractions that led to the termination.

Closing arguments: Hopefully you are surrounded by a group of top-notch, hard-working employees that are making your business thrive. To prepare yourself for facing the unpleasant task of terminating an employee just remember the three "P"s. First, prepare an employee handbook and use it frequently in training your employees. Second, implement a progressive discipline policy and document everything. Third, use prudence when telling an employee about your intention to terminate them. Be polite and always have a witness with you. Finally, make sure you have the proper insurance coverage for your business and you will feel cool even when you have to fire.

3-Steps to Build a Home Based Business With No Advertising Budget

There are roughly 3 steps towards building a home based business with no advertising budget. Of course if you have an advertising budget you will be able to move along faster and build your business more quickly but not everyone starts off at the same financial place so this article will show you how you can build a strong business with no advertising budget over time. Please note these methods will work if you apply them continuously. They are not designed to be used one time but rather numerous times over a long stretch of time.

Step 1: Article Marketing

Article marketing is one of the first steps you can take to market your business and this can be an effective tool if it is done correctly. If you are only thinking about using the articles to promote your business you will find that it is difficult to get your articles approved and the chances of your article being read will also decrease. Write unique content that is relevant to what you are looking to promote and dedicate yourself to your goals. The more articles you write the more exposure you will have. If time is a concern you can start with one article per week and gradually increase. Objective is at least 5 articles per week if not more.

Step 2: Social Media

Social media platforms such as Facebook, LinkedIn, and Twitter are a good way to increase exposure to your business but again this is about consistency. If you don't have a group of people already following you, the first step will be to start following others and posting content that offers value. For example, if your business is in the health and wellness industry post interesting facts about health related topics or things that people may want to know about health or how to become healthy. Once you have a built a stronger base you can start to share with them about the business that you are in. Remember social media is going to take some time to build so consistency is the key to success here.

Step 3: Video Marketing

Video marketing while a form of social media is different in that you have the opportunity to share with your prospects using the visuals that you are unable to do with article marketing and social media marketing. The end result of using video is it allows you the opportunity to engage with your viewers in a different way. The more invested your viewers are in the content you are providing the more exposure you will have for your home based business.

You now know 3 different steps and methods that you can use to build your home based business with no advertising budget. These methods do work and some of the most successful home business owners use these methods virtually exclusively in order to grow their business with the lowest out of pocket expense possible.

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