Turning on the news or picking up the paper can send a chill up the spine of small business owners. The economic conditions today are provoking some small business owners to wonder if their business is going to fail as a result.
It’s true that thousands of businesses have taken a direct hit as the result of the economic downturn. The good news is that many others continue to do well in spite of it. Keep in mind that businesses fail all the time. Whether the economy is booming or broken, there are always going to be businesses that don’t make it.
The Adverse Economic Climate
Of course, the current economic conditions can be especially harsh toward certain types of businesses such as construction.
The caution that many consumers are exercising now as a result of what is happening on Wall Street is causing them to keep more money in the bank (or in a home safe, for which sales have increased by 50% in the last few months).
They are using less credit to purchase non-essential items and, in fact, are having a harder time obtaining credit at all.
Toss in the price of gas and the rising cost of food and other goods, and you have an atmosphere in which it will be more difficult for many businesses to thrive. But that doesn’t mean that your business is doomed for failure.
As mentioned earlier, there are some common reasons for businesses failure in every economic climate. These include:
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Inexperience– Lack of experience is a common business failure cause. Many people, in the excitement of starting their own business, do so without the necessary skills and knowledge needed in order to be successful.
These businesses, obviously, struggle. It’s much better to be sure that you’re prepared before launching.
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Insufficient Capital– While there are plenty of encouraging stories about people who grew successful businesses without a lot of capital, there are also many businesses who failed for that reason.
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Poor Use of Funds– Another common mistake of new entrepreneurs is the unwise use of their startup funds. Some businesses start in the enviable position of having plenty of seed money.
Then, instead of using the money in ways that make sense, and keeping some in savings for an emergency, the business owners squander it on high end business vehicles, office furniture and other items that will not directly help to bring in revenue to the business.
Some are even foolish enough to spend it on personal items not related to the business.
These are some of the common business failure causes to avoid. You can’t control the economy, but you can find ways to try and work around it a bit. You may have to lower your prices, and therefore your profit margin, to keep some customers during this difficult time.
Try finding ways to add-value for your customers. Sure, it’ll cost more – but even a small profit is better than allowing your business to fail.
While some things, like the economy, are out of your control there are some reasons for business failure that you can avoid.
By doing all you can in the areas that you can control, you will at least be assured that your small business has a fighting chance.
