COMMENT
Why Small Businesses Fail

Starting a business from scratch is not easy. In fact, more than half of all new ventures in Britain close within three years of opening - that's a scary thought. So, if you are planning to venture out on your own, here are some pitfalls you should try to avoid.

Insufficient Cash

Insufficient capital is often, though not always, at the heart of most businesses failures. It is reckoned that around four out of five businesses start out with too little money. Generally, it is found that small start-ups can manage to survive for a short time on limited capital, but eventually the money runs out.

Inadequate Sales

It may seem blindingly obvious but failing to identify target markets before you start up in business is another cause of many business failures. Around three quarters of new businesses go bust simply because the business plan has been badly put together at the outset. Additionally, many new business owners are much too hopeful about achieving over-optimistic sales forecasts.

Sloppy Cost Control

Understanding how various costs impact a business is imperative if a business is to survive. It is estimated that around 80% of small businesses bite the dust simply because owners do not appreciate the implications of cash flow. It may not be a generally accepted accounting principle, but in my book a sale is not a sale until the money is in the bank.

Ignoring The Competition

Failing to monitor your competitors is another reason why many small businesses fail. One in two failed businesses admit to not knowing who their competitors were! Sometimes, your competitors may be your best source of ideas, especially if they are doing better than you. Remember, there is no shame in imitating, provided you don't infringe patent laws.

It's true that there are plenty of reasons why you should not start your own business. For a start it can be risky, and you may even fail. But running your own show can also be exhilarating and rewarding for the right person.

In my experience, having the right banker can be a boon to any fledgling business. I have always found bankers to be a great source of information, and sometimes it doesn't even cost a penny. After all, you are as important to banks as they are to you.

More: Business Banking | How To Make Money Part-Time | Financing Your Money-Making Ideas