It’s a commonly-held belief that most businesses fail within the first year. But, according to the Small Business Administration (SBA) Office of Advocacy’s 2018 Frequently Asked Questions, roughly 80 percent of small businesses actually survived their first year.
Beyond the first 12 months, however, this number falls sharply. Only about half of small businesses survive past the five-year mark, while one in three makes it to a decade.
This might discourage many prospective entrepreneurs, but once you identify and understand the primary reasons for failure, making a success of business ownership is a lot easier. Here’s what’s hard about the early days as a new business.
5Being the Boss
Many people will start a business so they can be their own boss. But with great power comes great responsibility, especially if you enjoy the rapid expansion and need to start managing people besides yourself.
“You have to make hiring, employment and termination decisions that don’t always make you popular,” says small business expert Melinda Emerson. “You must make the tough calls that impact the success or failure of the company. You have a lot to gain in money and prestige, but much to lose as well.”
4Not Having Much Money For a While
Unless you’ve already got significant financial backing, such as a savings account or trust fund, there’s a good chance you won’t have much money for a long time. This means saying no to dinner with friends or going on vacation.
However, there is an upside to being cash-strapped at the beginning of a new business. Over time, you’ll learn to make savvier financial decisions, which should stand you in good stead for strategic planning, annual budgets, and tax form preparations – such as these from IntuitMarket.
3Having a Good Work-Life Balance
Starting and running your own business means a lot of personal investment, sacrifice, and risk. You’ll find it difficult to walk away from problems or opportunities to grow and, before you know it, working into the early hours of the morning is the norm.
But the importance of balancing your commitment to work with family responsibilities shouldn’t be underestimated. After all, stress and anxiety in other areas of life could distract you from running the business.
2Making Decisions And Taking Risks
Being the one who comes up with plans and ensures they get carried out is very different from executing directives from someone else. The buck stops with you, which presents a number of additional challenges.
As Emerson explains: “As the owner, every major strategic decision you make involves some risk. Not only is your money in play, but your credibility and standing in your community are often on the line as well.”
1Building it And They Don’t Come
Identifying a need in the market before setting up shop is critical to success. In fact, this is the most commonly cited reason for small business failure. But another challenge you’ll have to overcome is making your business known to potential customers.
And given the amount of competition that exists online all around the world, standing out from the crowd isn’t easy. So, develop a marketing strategy that clearly defines your target market and identifies where they typically purchase from. By failing to prepare, you are preparing to fail.