Primary Causes Attributed To The Failure Of New Business Start-Ups

Unfortunately, 8 out of every 10 new businesses will no longer be in operation after their first year and half in business.  What is the reason for this? And what is there to be learned from these failures that could be beneficial?  There are 5 primary causes attributed to the failure of these new business start-ups as follows:

Expanding your business too soon – so if you have a few successes early on, should you start planning expansion? Absolutely not!  First and foremost you have a lot to consider, especially when it comes to properly costing and funding that expansion.  So be patient, learn from your early mistakes, and then start planning your expansion if it’s feasible.

Insufficient operating capital – this all goes back to careful planning once you’ve decided to start your own business.  Many new entrepreneurs do not heed the old adage “by failing to plan, you are planning to fail.”  The bottom line is that you can’t slide by with less than 100% of the capital necessary to get your business up and running.

Lack of a sound business plan – along with insufficient operating capital (see above), not having a sound business plan is the kiss of death for so many start-ups.  Planning things out causes you to think about more than just sales and profit.

Poor business strategies – if you do not educate yourself about owning and operating your own business, it won’t matter how skilled you are at your trade.  Groom yourself first before taking the plunge.  There is a lot that needs to be learned.

Relying too heavily on debt funding – your debt payments have a payback term, so you’re on the clock and the first consideration is getting to the break-even point as quickly as you can.  If you don’t focus on this, you’ll be borrowing frequently in order to keep your doors open.