Why Small Businesses Fail – Time For New Thinking

Why Small Businesses FailkerSmall businesses fail for different reasons than we’re taught to believe.

To explain why small business fail, experts most often turn to two widely accepted reasons. One is insufficient capital to sustain the venture. The other is inadequate knowledge of the business and how to operate it. While those factors can contribute to failure, there’s a more basic cause that schools, government and advisors stubbornly refuse to acknowledge. That cause is more powerful and important than knowledge or capital. The age old saying of ‘where there is a will there is a way’ plays the most important role life’s accomplishments. Starting and succeeding as an entrepreneur is a perfect use of that phrase.

Capital is NOT the primary reason for small businesses failure

First, in terms of capital, a great number of entrepreneurs ‘shoe-string‘ new ventures. Don’t be afraid to start out small. In fact, limited capital can be a blessing, not an impediment to starting a business. Too much money can easily lead to over spending. A limited money supply forces one to be frugal. It also forces one to labor diligently over financial matters. In other words, being light on cash can force better decision making.

In Fact, Start With Light Funds

Let’s go back to our prospective entrepreneur with an interest in food, specifically making and selling sandwiches. At the same time let’s add some limitations; the kinds of limitations that might stop a person from getting started. Our subject is married and works full time to support a family. They also carry some of the standard all-American debt, such as a home mortgage and car payment. In other words, our entrepreneur faces challenges that could interfere with and/or halt the idea of self-employment all together.

So what is our subject going to do? The first thing is to figure out the bare bones necessities of making and selling sandwiches. The most basic items are already at home: cutting boards, knives and other utensils. Certainly the vendor needs a cart with refrigeration, but that doesn’t represent a lot of money. In fact, the vendor can lease or rent equipment as required. Supermarkets will provide breads, meats and cheeses until the owner arranges wholesale purchases. The sandwiches require a venue, but there are lots of festivals in every part of the country. And the fact that most festivals take place on weekends fits perfectly with our 9 to 5, five day a week worker.

Finances are generally NOT the end of the road for the committed entrepreneur. In fact, low funds are often a blessing considering the fundamental need for self-employed people to be inventive. (Note: franchising cannot be shoe-stringed. You must buy the whole package. Also know that franchising is not free of failure. There’s a lot of advice on franchising at this site.)

An Alternative To Current Thinking

After many years of study, observation and consulting, our response to lowering the high rate of small business failure is The Focus Program for Emerging Entrepreneurs. The program is a huge departure from current thinking and it represents the truth. Its time has come. The program is a process that helps entrepreneurs understand themselves relative to self-employment before considering business plans and launching into ownership.

Part Two of ‘Why Small Businesses Fail.’