GALT Consulting LLC

The Small Business Administration of the U.S. Government estimated in 2006 that 50% of small businesses will fail within the first 5 years.  Data on the reasons why businesses fail is poor, largely because the factors that lead to failure are often complex and not well understood.  However, various authors and experts agree on some of the most common reasons.  I have compiled some here...

1) Denial - Business is personal, regardless what the Godfather says.  All too often business owners don't like to look at the whole picture, preferring to focus on the good news.  I have seen restaurants who are losing money on every plate of food they put out.  I have seen manfuacturers continue to make widgets even though the widget market is falling out of existence.  Cure: Look fo an outsiders perspective on your business.  Confront the brutal facts (as Jim Collin's says in his book, "Good to Great").

2) Lack of Passion - The Kingsley Group, a business brokerage firm in Springfield, did an informal study a few years ago on what factors make a company successful.  They looked at all kinds of financial indicators as they had unusual access to data.  They found only one trend.  Passion.  Owners who are passionate about their business are more likely to succeed.  Owners who are just in it to make money or make a name for themselves are very likely to fail.  Cure: Find the unique value of your business and become its biggest fan.

3) High Capital Burden - People starting a business are programmed to imagine that they must invest a lot of money into the business.  Many borrow money to purchase the business, launch an initial ad campaign, set up a website, and buy the best office equipment/furniture they can find.  Many others sign a multi-year lease agreement.  These all put a monthly payment load on the business, which means it will be that much harder to survive.  MANY businesses doom themselves to failure before they ever open their doors.  Cure: Challenge yourself to avoid these reoccurring expenses.  Start by doing your own website.  Do you really need an office?  Can you find some cheap furniture?  Is the business really worth that much?  Wait until you have a steady stream of income before committing to a monthly payment.

(to be continued....)