Why Do Most Small Businesses Fail?
Unfortunately, Ambition Is Not A Deterrent Of Failure
As a marketer at a digital marketing agency, I spend my days thinking of how to help small businesses grow through online marketing. Therefore, I spend most of my time thinking of digital marketing as a means of growth. Focused on the positive results that marketing offers businesses, I do not often think of digital marketing as a preventative force against failure. Furthermore, I rarely think of what causes businesses to fail. So, while sitting at my desk just before lunchtime, I asked myself the question, “Why do most small businesses fail?”. I already had a hunch for the answer, but, in search of validation, I went to the web for more information. It turns out that my intuition is correct. Here is my explanation.
1. Lack of Working Capital
Time and time again, a lack of capital is deemed as one of the primary factors of small business failure. It makes sense. If you do not have enough capital to fund your daily operations (working capital), then how can you expect for your business to succeed. As a matter of fact, it won’t. It will definitely fail.
Capital is like a battery. It is what allowed you to start a business and it is what will keep it alive through the introduction and maturity stages of your product’s lifecycle. If you run out of battery so to speak, your business will die.
2. Cash Flow Problems
Whether you like it or not, there is a system of ins and outs when it comes to your business’ finances. If capital is a battery, cash flow is a circuit system. If your circuit system fails, your business will fail as well. At some point in time, the amount of cash flowing into your business must exceed the amount of cash flowing out of your business.
With that being said, repeat after me. “Revenue. Revenue. Revenue.” Without it, your net cash flow will dive into the negative and you will deplete your battery. Once you deplete your battery, your business will die. Get the gist?
3. Lack of Marketing
Aside from cash flow issues, lack of marketing is a commonplace cause of failure for small businesses. Marketing or lack thereof directly influences your ability to generate revenue by attracting paying customers to your business. Therefore, how can you expect your business to survive if you do not promote it?
Marketing factors, such as the location of your business and your ability to promote your products, have a direct connection to the success of your business. You should not take this lightly. Many business owners overlook marketing and their businesses fail as a result.
In today’s landscape, the placement of your business’ value proposition and messaging online is just as important as the physical location of your business. If the physical location of your business places you at a disadvantage, your online marketing efforts can even counteract a poor brick-and-mortar location.
How We Can Help
We, at TAPLocal, help businesses generate revenue through online marketing. In addition, we help businesses cut costs on payment processing. To help limit cash flow problems, we also offer instant funding and cash advances for our merchant services customers.