You have been working for another business for long and you felt ready to start your own business. You are confident that it will perform as you expect, after all you have technical skills required and years of experience. This is what goes in minds of most want-to-be entrepreneurs. They usually do not see the bigger picture; that they possess little business management exposure and no self-employment experience.

Discovering reasons behind small business failure is very important for would-be entrepreneurs. It helps expose personal weaknesses, as well as highlighting strengths before investing in becoming self-employed. It also helps aspiring entrepreneurs understand the dynamics of the industry they intend to invest in.

The following are some reasons why small businesses collapse. Some may also explain why your already established business is not growing.

Mistaking a business for a hobby

It’s always wise to research your business idea and ensure it is viable. Just because you love doing something does not necessary mean you can successfully convert it into a business. Remember the main aim of starting a business is to make money.

Poor planning

60% of business start-ups collapse within six months after opening. Two main causes of this failure are undercapitalization and lack of cash flow. Prepare a business plan, clearly indicating goals and visions and resources required. The make sure you have sourced enough money to implements you plans, and to take care of unexpected risks.

Failure to spread risks

In many cases, small business owners will offer one service, one product, or rely on one big client. When that one product or service fail to sell, or the big customer goes, that marks the beginning of the end for your business. Diversification allows spreading risks and somehow guarantees business sustainability.

Poor record keeping and financial controls.

Reviewing revenue and expense each month is a must. If you have no skills in accounting, contract someone to do it for you. You need to know where you small business is heading and why before it’s too late to save it.

Poor cash management.

When getting started you take some time without income, because new businesses are usually slow to take off. If your plan indicates high income earning in the first six months, just go back to drawing board and review your budgets.

Poor time management

Postponing tasks and making decisions will kill your business very fast. If you can’t carry out some tasks find someone who is qualified. If you need consultant services before making business decisions, just get them today not tomorrow.

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