Business Failure
There are people starting new businesses every day. Unfortunately, there are many small businesses failing, too. Why do most small businesses fail? They have limited resources, and they overspend. If you have a small business or are getting ready to start one, you want to make sure yours doesn’t go under financially. If you make good decisions concerning your resources, you should be able to avoid business failure.
How to Make Sure You Don’t Fail: Have Small Overheads
Many businessmen make bad purchasing decisions when they are getting started. They want everything to be extremely professional, but they often go overboard. With a new business, it will take time to build your customer base and show a profit. You need to be cost cutting on everything. You must be careful with your current financial resources. You don’t want to go broke because your expenses were too great. You need to avoid these common mistakes that waste resources resulting in business failure.
Common Financial Mistakes That Lead To Business Failure:
1. Investing in Too Much Office Space
In the excitement of starting a new business, many business owners go out and lease a nice, large office. They don’t currently have the resources to pay for the entire lease period. They are counting on paying the rent with their profits. They have overlooked the fact that it may be awhile before they are making enough to pay for this large space.
To avoid making this same mistake in your business, consider how much office space you really need. Can your business be started in a home office? Is it legal for you to run a business in your home? If the answer to these two questions is yes, then start your small business in your home. If a home office is not practical for your needs, then determine the minimum amount of office space you need to rent. Figure out if you have the money to cover the rent for an extended period of time. Many businesses are able to maintain a professional image in smaller offices. If you shop for a nice office that fits your needs and budget, you will decrease your chance of business failure.
2. Overspending on Office Furniture
Overspending on office furniture is another common mistake you should avoid. Let’s face it; you do not need a thousand dollar king-sized executive desk to prove you are a professional. Check the classified ads for good deals on second hand office furniture. If you are totally against that idea, then shop for a nice new desk for fewer than two hundred dollars.
3. Buying Expensive Office Supplies
New business owners often get carried away when purchasing office supplies. Don’t buy supplies unless you really need them. Shop for the supplies you need at reasonably priced stores. Skip the local office supply store and head for Wal-Mart. If larger quantities are needed, shop at a wholesale store like Sam’s. Buy only what you need at the best prices you can get.
4. Hiring Staff That Aren’t Really Needed
Businessmen often hire a staff for their new office. Don’t do it. If you and a family member can handle the business, there is nothing wrong with that. If you must have help, consider hiring a part-time employee. Don’t hire unnecessary full-time staff until your budget can cover payroll and benefits.
5. Outsourcing Work That You Can Handle Yourself
The new craze is to outsource work to get it done faster. If you don’t have skills to do a job, like setting up a computer, then outsource the job. Otherwise, do the job yourself and save the money.
Many small companies wasted money making those five common financial mistakes. The result was business failure. Set your goal to conserve your financial resources. Control your spending to avoid business failure. Be one of the few that succeed.
October 15th, 2008 at 11:46 am
Informative post.. Failures occur in every profession. Perfect decision making over what to do and what should not certainly lead you towards success.
October 30th, 2008 at 1:56 am
Great post. I think it is very important for people to understand this. Everyone wants to go out and get a large office and nice new furniture. Once again, great post.
November 4th, 2008 at 2:54 am
Speaking of small businesses and Walmart, Walmart is benefiting several ways from our financial ruin and the damage the retail giant has done to small businesses. Did you see the article in the Financial Times today with the CEO, Lee Scott, rejoicing at the plummeting economy because it helps Walmart’s bottom line?
This was the part that really killed me:
“He included the possibility of Wal-Mart and its Sam’s Club warehouse chain acquiring sites from retailers that were going out of business, with the chance to “negotiate very good rents”.”
After outsourcing millions of jobs they can’t even hide their glee as the economy tanks and they get the benefits.
November 10th, 2008 at 3:57 pm
Regarding in buying office furniture and buying an expensive office equipment.. Yes.. the looks of the office may be the one factor to our clients and the environment of our employees are important but we have to make more practical when we’re starting for a new business. We need to maximize the use of every materials we have and the no. of people we need.. and I think there’s a lot of things we need to consider to avoid failure of our business..
November 26th, 2008 at 1:03 am
I have run over 4 business which have collapsed, your post opens my eyes. Keep up the good work!