Introduction

          If you're a small business owner, chances are you've heard this statistic: 80% of new businesses fail within the first five years. And it's true; that's an average across all industries and types of companies. But don't let those numbers scare you away from starting your own business. The good news is there are plenty of ways to prevent failure, or at least mitigate its likelihood. In this article, we'll explore some common reasons why small businesses fail and offer suggestions for how to avoid them.

Deriving too much revenue from one source

 · Diversify your revenue sources.

 · Focus on creating income streams that aren't dependent on one source of revenue. For example, if your business is selling cleaning products and you have a sale that lasts for many months, this can be a great time to work on creating new products or services to sell. This way, even if there's a lull in sales for the existing product or service line for some reason, you'll still have other avenues of income coming in from other parts of your business operation.

Spending too much money on marketing

     One of the most common mistakes small businesses make is spending too much money on marketing. It's easy to get carried away with the wrong kinds of advertising and end up wasting valuable resources. This can happen in a number of ways:

 · You buy ads that aren't relevant or effective for your business.

 · You pay for useless analytics reports that don't tell you anything about how people are interacting with your ads, products, or services.

 · You pay for expensive ad placement without knowing if it will actually help you reach new customers.

    Ultimately, if your marketing strategy isn't working out as planned, it's time to start thinking about why that might be happening and what steps need to be taken next; before you waste any more money.

Failing to create a business plan

     The first step to avoiding small business failure is to create a solid business plan. This is a major undertaking and one that you should take seriously. The lack of clear goals and objectives is one of the primary reasons small businesses fail. A strong plan can help you avoid this fate by helping you set goals and achieve them, even if they aren't always easy ones, such as selling more products or becoming more profitable than you already are.

    A good business plan covers all aspects of your company's operations: finances, marketing strategies, staffing requirements, and procedures for handling customer complaints or problems with suppliers or distributors. You should also include any legal requirements that apply to your type of business; these might include inspections from local fire departments or other regulatory agencies depending on what kind of work goes on in your shop every day (e-commerce sites don't need these same kinds of permits).

Not paying attention to accounting, especially cash flow

    One of the most important things you can do as a small business owner is to track your cash flow closely. Cash flow is simply the increase or decrease in your company's assets that comes from the difference between what it spends and what it collects on a regular basis. Tracking your cash flow will help you determine whether or not your business is profitable, which is essential when making decisions about how to run your company in the future.

    The easiest way to track cash flow data is by using a spreadsheet program like Excel or Google Sheets. You can use this spreadsheet as an easy tool for analyzing how much money has come into and gone out of your company since its inception. If you want something more advanced than Excel, one option would be Quickbooks Online: this software makes it easy for users without accounting backgrounds to manage their finances with ease.

Not having a healthy relationship with your business bank account

 · Be careful of how you manage your business bank account.

 · Keep track of your business bank account and make sure there's enough money in it. If you don't have enough, then something needs to be done about that, whether it's making more money or spending less money on things that aren't necessary for the business. Having a healthy relationship with your bank is important because if they stop trusting you as an entrepreneur and think something shady is going on with the company, then they might decide not to let you have access anymore!

Expansion of the workforce at an unsustainable rate

    One of the most common mistakes small business owners make is adding too many employees to their payroll, especially when they first open their doors. It is important to have the right people in the right roles, and it is just as important to make sure you have the right processes in place for managing those new staff members. Once again, as with so many other aspects of running a small business, there are two things that can go wrong here: not hiring enough people or hiring too many people. If your company ends up with too few employees who don't have enough work to do (or tasks on which they can focus), then productivity suffers; and if those same employees are doing something that could be handled by another employee instead, then efficiency suffers even further.

    On the other hand, having more people than necessary on board could lead to an increase in overhead costs such as health insurance premiums or payroll taxes; items that may not seem like much at first glance but will really add up over time if left unchecked.

Tracking the wrong data

You'll want to track the following metrics:

 · Accounts receivable: how much money you have coming in from clients, and how long they've been waiting on payment. This may be an issue if your clients don't pay on time or at all.

 · Accounts payable: how much money you owe to vendors and other suppliers, what those payments are for, and when they're due. If you don't keep track of this data properly, it can cause issues with getting paid by your vendors or suppliers (and ultimately having them go out of business). Also important because there are tax implications here that could cost you a lot more than just losing some cash flow.

 · Net profit/loss margin: the amount of money left over after paying for things like taxes and salaries (if any). You want this number as high as possible so that when something goes wrong later in life; like an employee gets sick unexpectedly or needs surgery without medical insurance coverage, you'll still have enough funds saved up so that business operations continue without interruption.

Focusing on day-to-day operations without taking time to grow your business

    When you’re caught up in the day-to-day operations of running your business, it's easy to forget that growth is a necessary part of being successful.

   To avoid this: plan ahead and take time out of each week to think about how you can grow your business; even if that means taking a few hours here and there, or having one day each month where you focus on future plans.

Small businesses fail often, but if you follow these tips, your business can be successful

 · Planning is important. It’s a good idea to plan your business before you start it, and continue planning as your business grows. Make sure that you have a strategy, goals, and objectives in place before starting out on your endeavor.

 · Keep track of money matters carefully and keep an eye on expenses so that they don't get out of hand. The more cash flow problems that you have, the more likely it is that your small business will fail or go bankrupt at some point in time

 · Monitor competition carefully; if there are no competitors in the market then there may not be enough demand for what you're offering customers! If there are too many competitors then this could lead them into price wars which can hurt profits over time if unchecked; so make sure not only you know who's out there but also how much they're charging so as not to undersell yourself while still making enough money per sale.

Conclusion

     Businesses may fail for a variety of reasons, as is evident from the examples provided above. Keep a watchful eye on these risk factors and take the suggestions above into account so you can establish a successful small business with a loyal customer base.

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