The #1 reason new businesses fail is lack of managerial expertise. This lack of expertise has at least 6 aspects.
1) Under capitalization. Smart business people write a business plan before they open their doors. This business plan will help determine how much money you’ll need to operate before the business turns profitable. However, regardless of what these numbers tell you….double them! You’ll never be sorry you’ve got too much cash. But, you’ll rue the day you run out of money.
2) Lack of knowledge about the industry. If you think on-the-job training will be ok when starting a business, I’ve got a bridge in Brooklyn to sell to you. Needless to say, you’ll never know everything there is to know about your new business. But, ignorance of this industry will probably lead to bankruptcy.
3) Improper or incomplete financial controls. There is an old saying that “you may think you’re winning when in fact you’re losing if you’re not keeping score”. Keeping accurate, up-to-date financials is crucial to the success in any business. Sloppy or delayed bookkeeping generally leads to disaster.
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Next week’s blog: Why New Businesses Fail: (Part 2)