The Truth About Why Small Businesses Fail

Why Small Businesses Fail

Why small businesses fail – The Truth.

To explain why small business fail, experts 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 why small businesses fail, there is a much more basic cause that schools, agencies and advisors stubbornly refuse to acknowledge. And that cause is far 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 why small businesses fail

First, in terms of capital, most entrepreneurs shoe-string new ventures. By way of example, we’ll use a person with an interest in the sandwich business. Starting a brick-and-mortar location or even a full-time effort is challenging. It’s called SMALL BUSINESS for a reason. Don’t be afraid to start out small. In fact, limited capital can be a real blessing, not an impediment to starting a business. Vast amounts of capital can lead to vast mistakes whereas 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.

Getting Started

Let’s go back to our prospective entrepreneur who is interested in, no not interested in, but in love with the idea of making and selling sandwiches. At the same time let’s add some limitations; the kinds of limitations that could very easily 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. Our subject needs basic equipment, but can find inexpensive equipment like cutting boards, knives and other utensils at home. 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 NOT going to stop the real entrepreneur from moving forward and not the reason why small businesses fail. In fact, as mentioned above, low funds are a blessing considering the fundamental need for self-employed people to be frugal and inventive. Now, if a franchise is the goal, then it’s normally an all or nothing proposition. But franchising makes exceptions to accommodate unusual prospects and unusual situations.

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 Focus Program is a huge departure from current thinking but it represents the truth, and its time has come.