There are multiple ways small businesses self-destruct.  “Many people think that small businesses have it quite easy due to the wealth of entrepreneurship in the United States. The reality, however, is that 18% of small businesses fail within their first year, while 50% fail after five years and approximately 65% by their tenth year in business. This information is as per the Bureau of Labor Statistics.” —  US Chamber of Commerce

Yes, only half of new businesses survive to their fifth year, and only one-third make it to their tenth anniversary. Why do so many companies fail? Some causes of failure businesses have little control, such as economic downturns, new technology, and politics. What’s different about businesses that survive? Are they luckier or better prepared to succeed? The answer is most likely a little of both, and they probably didn’t shoot themselves in the foot.

The Top Ten Ways Small Businesses Self-Destruct 

  1. Not enough cash on hand

Any business that survived the economic challenges of 2020 learned this lesson. Lines of credit evaporated almost overnight, and cash reserves were exhausted. The companies that survived learned their lesson. Keep reserve cash on hand.

  1. Not changing with the times

There are many examples of this. For example, look at how times have changed from Blockbuster to Redbox to Netflix. Don’t be Blockbuster. Stay up to date with your market and customers.

  1. Accounting confusion

Hiring an accounting firm doesn’t mean the firm has the same vested interest as the owners. Someone within the organization should always stay on top of accounting.

  1. Not meeting customer needs or solving client problems

If your product doesn’t fulfill the needs and wants of customers, they will not flock to your door. Don’t solve the problem you wish to solve—solve the problem your customers have. Give your customers what they want.

  1. Poor location

This problem is easy to recognize for brick-and-mortar retail stores, but it can also affect B2B and internet companies. Whether your business has a building or is online, it will be difficult if  customers cannot easily find you.

  1. Lack of effective marketing

Hit-or-miss marketing isn’t a plan. A marketing plan includes a budget, market research, and media reach.

  1. Limited knowledge of competition

When businesses fly in the dark, they’re liable to hit something. Staying abreast of your competition’s marketing efforts, products, and customer service will inform you of opportunities as well as threats.

  1. No business plan

Not only a business plan but policies, procedures, and systems. The most likely outcome of flying by the seat of your pants is crashing.

  1. Lack of demand for the product

Creating a need for a product is difficult when no need exists—finding a new answer to an existing problem or doing it better than competition puts the horse before the cart where it should be. Don’t create a product no one needs.

And one reason you didn’t think of

Drum roll, please. No succession plan. Even the most dedicated owners, entrepreneurs, and CEOs get sick, pass away, or move on. When there’s no succession plan in place, the survival of the business becomes a crap shoot.

It’s a challenge

There are enough challenges to keep any small business’s doors open without creating more. Threats come from the economy, politics, and new technology. Government regulations are ongoing and ever-changing. The mega-store that moves in next to the mom-and-pop, changes in demographics, and buyer habits all impact the bottom line for small biz in America. There is no room in small business for self-destructive behavior. Are you in a small business? What are your biggest challenges?

Photo by Chris Anderson on Unsplash