by Wordy

Created on: February 23, 2009

I don't need to reiterate the statistics lots of small businesses fail and there are some pretty common reasons for this.

Most small business owners are really good at something, and rather than doing that something for other people, they decide to do it for themselves, looking forward to the undoubted rewards that come from being your own boss. However, being really good at making something, painting and decorating, organising events, or whatever you've set up your business to do, doesn't actually make you good at running a business.

If you're going to run your own business you need to be able to do accounts and manage cash flow, undertake sales and marketing activity, recruit and manage employees, choose, buy and maintain IT equipment, secure backing from a bank or other financial institution... the list is endless. Rather than spending your time doing the one thing you're really good at and enjoy doing, you end up trying to fight all these other fires, and at times you'll find yourself out of your depth. Mistakes are easily made and these can be very costly indeed.

The two most common reasons for small business failure are cash flow and sales.

Everyone in business has heard the clich "cash is king". Clich it may be, but it is also true. A sale is not a sale until the money is in the bank, and outstanding invoices cost your business dear. Collecting money owed to you is the most important thing you can do to keep your business afloat. A promise of payment is worthless; money in the bank means you can pay your bills.

You also need to make sure that you have a steady flow of new sales leads and orders. A common mistake is to take on an order, do the work, then think about where the next order will come from. You need to keep your sales pipeline full at all times, so that work continues all the time, with no downtime between contracts. To do this requires effort and investment in sales and marketing activity. You can't just set yourself up in business and wait for the phone to ring; you have to put yourself out there, let people know about your business, your products and your services, how fantastic they are, what brilliant value etc. And you must maintain this effort; it's like being on a treadmill, as soon as you stop running (selling), everything goes very wrong very quickly.

The best way to tackle the issues that commonly cause small businesses to fail is to seek professional advice from the outset. Find a local small business advisor and use them as a sounding board for your ideas as well as a practical source of help and advice on issues you might not be familiar with, like filing regulations or employee benefits. Combine this with sound financial management and a solid sales and marketing strategy and you can be sure your business with thrive.

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