The Small Business Administration reports that in 2022, small businesses accounted for more than 99% of all U.S. businesses. However, starting and maintaining a small business can be difficult.
The U.S. Chamber of Commerce shares the following common reasons why small businesses fail and ways to help avoid those mistakes.
- Lack of planning. A business plan outlines operations, goals and finances, and it should be well-developed long before products and services are available to customers to help you measure progress and make adjustments. In your business plan, include an executive summary of your business and a clear company description; information regarding your company’s organization and management structure; products and/or services you will offer; marketing and sales strategies; financial projections and funding requests; and an appendix with necessary sources and additional information. Review your plan regularly and update it when needed.
- Financial challenges. Common financial issues include limited funding, inconsistent cash flow, combined business and personal finances, and issues with budgeting or establishing prices. You should understand various funding options and determine which are most appropriate. Be sure you understand how to manage and track your finances.
- Poor employee management. Bad employee management hurts employees and the business, leading to excessive turnover, stress and reduced engagement. Keep employees engaged by giving them a sense of autonomy, competency, achievement and belonging. Management should be trained regularly to build and enhance leadership skills.
- Inadequate marketing. Budgeting for branding and marketing expenses is crucial. Identify your market segment and determine how you want to approach potential customers. Test your marketing strategy by creating relevant content and campaigns, and develop a plan to measure and monitor the success of your efforts.
- Failure to adapt to market changes. Change is inevitable, so you must be prepared to adjust to market changes. Some strategies that can help your business adapt are hiring forward-thinking employees who understand and believe in your mission; creating a positive work environment with opportunities for growth and development; conducting research and paying attention to what is current and relevant; knowing your target audience and how they may change over time; and staying current with technology.
