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Sunday, September 21, 2014

Few reasons new business will flop

Most entrepreneurs charge into the marketplace with high hopes of success, but many face crushing disappointment when their businesses fail. In fact, the number of small-business exits exceeded the number of start-ups for the first time this year. While 400,000 new businesses are being created annually, 470,000 are closing, leaving a deficit of 70,000.

Not all business exits are failures -- sometimes an owner gets a job or retires -- but some of them undoubtedly are. And often it's because the owners got blindsided by factors they did not anticipate.
"A lot of companies fail unexpectedly," said attorney Andrew Sherman, a partner at Jones Day in Washington, D.C.,who advises businesses on issues affecting growth and strategy. "They fail by surprise; they don't have any safety belt."
The good news? "A lot of risks can be averted, but only if you plan for them," Sherman said

Empty pockets
"The No. 1 reason people fail is, they run out of money," said David Goldin, CEO and president of AmeriMerchant, a provider of merchant cash advances.
Research bears him out. The report, produced by Babson College and other universities, found that the top reasons for discontinuing a business in the U.S. were problems obtaining financing and lack of profitability -- problems that plagued more than half of businesses that shut their doors. Only a few economies had more exits triggered by these problems: Japan, Korea, Greece, Portugal, Ireland and Spain.
Of course, it's not just failure to raise money that can lead a business to fizzle. Many high-revenue businesses suffer from poor cash flow. They can't make payroll or keep the lights on because there's a big gap between when they finish their projects and when they get paid -- sometimes due to simple problems, like failing to invoice promptly.
It's not a rookie mistake: About 37 percent of experienced business owners sometimes fall short of the cash they need to cover business expenses.

Sometimes the critics of a new business concept are right: Founders are wasting their time on an idea that's a dud or is ill-timed -- and haven't done enough testing or market research to find that out. "If you're not keeping up with the trends, there's a good chance customers won't purchase your services," AmeriMerchant's David Goldin said.
"I advise entrepreneurs not to be bullheaded about an idea when everyone is saying the idea doesn't work,"

A poor pricing strategy
What consumers tell market researchers they are willing to spend doesn't always sync up with reality. Until you test your pricing in the marketplace, it's hard to tell if potential customers will actually pay what you plan to charge. Another common hazard is failing to price a company's offerings in a way that allows a profit. You have to test test and test your market.

Dueling partners
There's nothing wrong with spirited debate among founders -- some level of it is healthy for governance -- but when there's constant conflict or one partner checks out emotionally, it can destroy the team's morale.
"A lack of collaboration and communication by and among the co-founders looks like parents fighting in anticipation of a divorce," Jones Day attorney Andrew Sherman said.

Most businesses feed off the owner's energy and excitement -- and there's plenty of it to go around right now. A recent survey by Manta, the online social network for small businesses, found that 83 percent of owners were optimistic about the second half of the year.
When that eagerness to succeed is missing -- which can happen for many reasons -- the business can quickly die on the vine.

A stale marketing message
Big companies know that it's vital to refresh their brand. Even car-rental giant Avis, which stuck with its classic "We try harder" tagline for 50 years, updated it in 2012 with a new one -- "It's your space" -- which touts the comfortable interiors of its cars.
Small companies that lack the marketing budgets of corporate giants often neglect this side of the business—to their peril. The National Small Business Association's found that only 46 percent of respondents planned to try new advertising and marketing strategies in 2014.
If you haven't given any thought to your branding recently or are using the same piece of direct mail you used four years ago, that's a warning sign you could soon be running the business that time forgot.

If you are thinking about starting a business or are running a business, plan ahead to avoid these traps. Here is a easy small business you can do anywhere in the U.S. PART TIME

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