Why Small Businesses Fail

I recently attended the Enterprise Council on Small Business Summit in Florida.  Among the many interesting topics about small business being discussed, I was particularly keen to understand why so many small businesses fail.  You could probably name all of the logical reasons that come to mind: the economy is slow, the location isn’t right, not enough resources, etc.  Maybe it’s because there is so much competition.  We’ve all had that daydream about starting a business to bring you happiness, make more money, and be your own boss.  So what does it take to start a successful business?

According to Google Adwords there are 600,000 monthly searches for “starting a business.”  If you are one of those people considering starting your own business, do yourself a favor and learn from others’ mistakes.  According to the SBA, there are 8 top reasons that small businesses fail:

  • Lack of experience
  • Insufficient capital (money)
  • Poor location
  • Poor inventory management
  • Over-investment in fixed assets
  • Poor credit arrangement management
  • Personal use of business funds
  • Unexpected growth

All of these reasons seem fairly obvious.  I’d like to offer another reason to ponder based upon a discussion at the ECSB Summit: not treating your business like a business.  What I mean by that is many business owners don’t take advantage of business grade services.  They tend to just stick with the consumer services they have been using for their personal needs.  An example is maxing out your personal credit cards instead of legally establishing a company and obtaining a business loan in that company’s name.

Technology is another key area where costly mistakes can be made.  Utilizing “free” consumer services for your applications or infrastructure could potentially lead to a whole slew of problems as your company grows.  Consumer services typically do not have service level agreements guaranteeing your service. Many times the service is advertised as free, but really the customer will be charged after a certain threshold is met.  You can end up paying much more than if you had started with a business class service.  I see this happening in the IT world particularly in the wonderful world of cloud services.  There are many so-called cloud providers offering all kinds of free services, but are they truly business grade offerings if you peel back the covers?   AT&T recently launched a new cloud infrastructure offer, that is extremely affordable, secure, and business grade.  Many start ups and small business are taking advantage of what the cloud can offer in terms of savings.  Gone are the days of having to fork over thousands of dollars for purchasing and maintaining hardware and software, additional storage, disaster recovery services.

Cloud services are leveling the playing field for small businesses. Be sure to do your research and don’t sell your company short.  If you want your business to be taken seriously treat it like a business and not a hobby.

If you’re thinking about starting a small business, how could you benefit from business grade services? Have you investigated what cloud services can offer?
Kelly Malone Lead Product Marketing Manager AT&T About Kelly