In the first part of this series we discussed self-reflection and the questions you should ask yourself to decide whether the entrepreneurial path is right for you. Starting a small business is always risky, and the chance of success is slim, but recognizing the reasons businesses fail and avoiding common pitfalls can be some of the keys to success.
An excerpt from the Small Business Administration on why small businesses fail
Reasons for failure
In his book, Small Business Management, Michael Ames gives the following reasons for small business failure:
1. Lack of experience
2. Insufficient capital (money)
3. Poor location
4. Poor inventory management
5. Over investment in fixed assets
6. Poor credit arrangements
7. Personal use of business funds
8. Unexpected growth
Gustav Berle adds two more reasons in The Do It Yourself Business Book:
2. Low sales
More Reasons Why Small Businesses Fail
These figures aren’t meant to scare you, but to prepare you for the rocky path ahead. Underestimating the difficulty of starting a business is one of the biggest obstacles entrepreneurs face. However, success can be yours if you are patient, willing to work hard and take all the necessary steps.
On the Upside
It’s true that there are many reasons not to start your own business. But for the right person, the advantages of business ownership far outweigh the risks.
1. You will be your own boss.
2. Hard work and long hours directly benefit you, rather than increasing profits for someone else.
3. Earning and growth potential are far greater.
4. A new venture is as exciting as it is risky.
5. Running a business provides endless challenges and opportunities for learning.
To summarize, the majority of small businesses fail because they run out of resources. This usually means you run out of cash flow (money to keep the business operating), which most likely is a direct outcome from one or more of the 10 reasons mentioned above.
Resources to help you succeed
While the excerpt above explains the reasons for failure and some of the benefits of success, it doesn’t explain how to succeed where others have failed. Fortunately, there are literally thousands of programs and services available to help mitigate your risk and give you the tools to build a great business!
So the next question is where do you start and what resources should you take advantage of? This likely depends on which entrepreneurial path you choose, but a great place to start is your local SBA office. Here is a list of just a few of the resources that you can take advantage of:
· Small Business Development Centers (SBDCs): http://www.sba.gov/aboutsba/sbaprograms/sbdc/
Small Business Development Centers operate in each state, the District of Columbia, Puerto Rico, and the Virgin Islands. They provide consulting and education services to small business owners on topics ranging from management practices to technical skills. For example, you can receive training on conflict management and Oracle databases at the same center.
· Service Corps of Retired Executives (SCORE): http://www.score.org/index.html
A nonprofit organization, SCORE is made up of retired business owners and executives with decades of experience starting and operating businesses of all types. SCORE provides free and confidential counseling and low-cost workshop services, which can help you learn to write a business plan, apply for a loan, hone your management skills, and become a more confident small business owner.
· WomenBiz: http://www.womenbiz.gov
Contract Assistance to Women Business Owners (CAWBO) and the National Women's Business Council, in cooperation with other federal agencies, developed this website. It provides over 100 links to federal procurement and subcontracting information, opportunities and registration sites for bidders' lists.
· Women's Business Center: http://www.sba.gov/aboutsba/sbaprograms/onlinewbc/index.html
If you are a female veteran, the Women’s Business Center can provide additional assistance, such as counseling and training, and a variety of need-based funding and financing opportunities.
· Native American Affairs: http://www.sba.gov/aboutsba/sbaprograms/naa/index.html
Within the Office of Entrepreneurial Development, the Office of Native American Affairs concentrates on outreach and support for Native American small business owners. If you are Native American, this office can help you find specific business resources and other Native American businesses. In addition, the office will assist you in attending national economic development conferences.
Small Business Training Network (SBTN): http://www.sba.gov/training/Through the SBTN, you can take online courses in a variety of business and management areas, receive online counseling, access the full SBA library of resources, and view connections to other educational and training opportunities
Now that you understand some of the reasons why businesses fail, you should determine what your goals are as an entrepreneur and what type of business you want to start.