According to the Small Business Administration (SBA), 80% of businesses survive the first year, but almost half of the businesses fail by year five, so it’s a progressive downslide from year one.
However, successful entrepreneurs are increasingly encouraging new generations to start a business. Entrepreneurs and professionals that support small businesses are building a community of legally savvy entrepreneurs, sharing legal knowledge and information that entrepreneurs need to know right from the start and at every stage of their business development.
To prevent failure, it’s important to know what can cause it.
The reason that many small businesses fail is first and foremost inadequate business planning.
One aspect of planning is understanding the market. An entrepreneur comes up with what they believe to be a wonderful idea, and whether it’s by execution or otherwise, they find that people just don’t want it. Therefore, one reason why small businesses fail includes no market need.
Not enough capital is another concern.
Not having the right team is another source of failure. Many business partnerships come together through friendships. Individuals believe that they’ll be able to work together but don’t analyze their skill sets. The person that entrepreneurs go into business with is not always the best person from a business perspective. What makes a good friend does not necessarily make a good business partner.
Competition is another reason why small businesses fail.
Conducting a realistic competitive analysis is really critical. Sometimes entrepreneurs and small business owners get hit by competition that they didn’t fully expect or prepare for.
Lastly, lack of or inadequate pricing structure is another source of failure for a business.
Pricing structures need to be developed and implemented in a business so that profitability can be achieved.
Small business failure is sometimes preventable. The knowledgeable team at Chase Law Group, P.C. is always available to answer questions and provide consultation for small businesses as they navigate the business planning period. Give us a call at (310) 545-7700 or contact us here and set up a consultation today.
Find a free report, Top 5 Legal Mistakes Small Business Owners Make, at DeAnnchase.com.