by Ronald Manalastas

Created on: August 27, 2009   Last Updated: August 28, 2009

What causes most small businesses to fail, with just about 5% managing to survive after the first three (3) operations? Small businesses flounder due to critical errors made by their owners from the point of business conception to execution, and these errors originate from inferior thoughts and poor management decisions.

The following describes the 10 most common errors, inclusive of lapses and omissions, generally committed by small business owners:

1. Parochial Mentality

Most small business owners go into entrepreneurship without even knowing who they are, what they are capable of, what delights and excites them, and what they want to achieve. Aside from sporting serious lack of self-awareness, most small entrepreneurs do not possess intimate knowledge of the product, markets, competition, legal framework, and context of business they are supposed to deal with. In short, everything starts from poor thinking, with a myopic view of the horizon that lies ahead and ignorance of the demanding discipline and challenges of entrepreneurship. As a result, the business moves erratically and with great operational difficulties.

2. Remedial Entrepreneurship

In many instances, small entrepreneurs go into business prompted by reactive and haphazard remedial decision, a course of action engendered by job loss, under-employment, early retirement, accommodation of a family member, relative or friend, household cost consolidation, tax shield, image-building intention, or any other rationale where neither passion nor hobby serves as a compelling reason. Small businesses of this type usually lack managerial and leadership quality, operating without the mind, heart, and soul of the owner, and the commanding leadership of a full-fledged entrepreneur.

3. Bandwagon Syndrome

Many small entrepreneurs are led to go into business by a strong bandwagon syndrome, an illusion of success coupled with abnormal predisposition to hurriedly invest in fads, trends, or fast-growth businesses where others earlier excelled. This mentality entertains the traditional view that everything developed or produced can actually be sold because market demand will consume all production output. What are missed out are issues on short product life cycles, introduction of substitute or complementary products, complex supply and logistics requirements, adverse regulatory changes, disruptive technologies, intense competitive rivalry, and local impact of globalization. These daunting issues

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