According to Bloomberg, 8 out of 10 new businesses will fail within the first 18 months. What can you learn from this colossal amount of failure with small business?

If you have ever started a business and failed, you certainly feel bad about the money lost, time lost and effort spent trying to make it work. You might think your business was a failure for any number of reasons. You might think it was a lack of motivation, bad timing or partnering up with the wrong people.

But your business failure probably had very little to do with what you thought went wrong. So if you don’t want history to repeat, you need to learn the real reasons why your business failed. BMI Capital International, your corporate financial advisors, offers common reasons why small businesses fail.

Overexpansion

A leading cause of business failure is overexpansion. Overexpansion often happens when business owners mistake success with how fast they can grow their business. It is important that you focus on slow and steady growth as many failures are caused by rapid expansion.

Keep in mind that you don’t want to repress growth either. Once you have established good cash flow and a solid customer base, let your success dictate the pace of growth. Expansion should only be warranted after careful research and analysis.

Poor Planning

If you have ever been in charge of a major project, then you know that only after strategic planning and hard work will it be a success. It is critical that your small business has a business plan in place. Many small businesses fail because of fundamental shortcomings that could be avoided with a strong plan.

The components of your business plan should include:

  • Workforce needs
  • Market analysis
  • Potential problems and their solutions
  • Visions and goals
  • Analysis of competition
  • Capital equipment and supply list
  • Marketing and advertising ideas

And the list goes on.

Wrong Location

A bad location can spell disaster to what is otherwise a well-managed business. There are several factors to consider when choosing a location for your business. For example, you want to find a place where your customers are, where there is plenty of parking and where warehousing and equipment storing needs are met.

Lack of Capital

A common business mistake is having insufficient operating funds. New business owners often don’t understand the importance of cash flow or underestimate the amount of money they need to get the business started. They might also have an unrealistic expectation of incoming revenue.

It is critical that you know how much money you will need for a successful venture. It is also important to know the cost of staying in business and that it could take a few years before things really get going.

Lack of Internet Marketing

If you own a business today, you need a great website and social media presence. In the United States States alone, nearly 90% of the population are internet users and e-commerce sales continue to rise year after year.

Reach out to BMI Capital today to learn more about what we can do for your business.