One third of small businesses fail within the first two years, according to the Small Business Administration, and within the first five years more than half of businesses fail. It pays to look at your business, the marketplace, and more than anything, yourself from an honest perspective. Avoiding these mistakes will increase the survival rate of your business.
Mistake # 1: Insufficient funds. Before entering the marketplace, it is a good idea to reserve at least 3 times the amount of estimated cash. With sales and revenues up and down, along with some unforeseen expenses, small businesses tend to experience down times. The cash that is on reserve can be used to help out in these tough economical times.
Mistake #2: Inadequate planning. To build a business, you need a foundation, goals, and an implementation strategy. Research is essential in developing a sound business plan. It consists of understanding the entire market, knowing what differentiates your product from others in the same market, and knowing what costs will be acquired to implement your plan. A business plan is very specific, breaking all of the details down bit by bit.
Mistake #3: No flexibility. After developing your business plan, be adaptable to conditions that may change. Although you may start off with a good business model, not modifying it could cause failure in the business. Don’t be afraid to change with customers or competitors as they change.
If you are interested in starting a new business and have any accounting or tax related questions, give us a call at 706.353.1711.