Five Reasons Why Businesses Often Fail
Writing in Drycleaning & Laundry Institute’s Fabricare magazine, Steven Strauss offered the following comments in response to a question he received. DLI thinks that a
continuing investment in knowledge and growth as a businessperson through professional
affiliation is integral to success. We speak to this during “Investigate Before You Invest –
Avoiding the Pitfalls.” Here are Mr. Strauss’ thoughts on the subject.
Q My brother-in-law recently had to close his small business – he just couldn’t make ends meet. I have heard a statistic that roughly 9 out of 10 businesses fail in
the first five years. Is that true? If so, why?
A We have all heard that statistic, but it is probably exaggerated. Depending
upon who is doing the surveying, small business failures may be as low as 20%.
Those that survive beyond that tend to last a long time.
1. Lack of adequate cash flow. Even the most successful of ventures will fair if it
doesn’t have a steady stream of cashing coming in the door. Many small business
owners have a difficult time projecting what will come in every month and thus,
how much should go out. It is vitally important for an entrepreneur to learn some
basic accounting and be able to make a cash flow projection that will help you
understand how much you can afford to spend every month.
(During “Investigate Before You Invest – Avoiding the Pitfalls” we address
poor planning and lack of economic examination and follow-through.)
2. Having only a single recipe. I like to say that making money in business re1uires
a good recipe. Once you learn one that works well for your business (such as a
sale that works or an ad that pulls), then you can do it again and again to bring in
consistent results. It is a recipe for success.
The problem for many small businesses is that they learn one recipe and never
learn another. A stock investor would never have just one stock – he diversifies.
Small Businesses fail when they never learn any new tricks, fail to diversify, and
thus lean on a single recipe that sometimes goes stale.
An adjunct to this is that the entrepreneur must also be flexible. What works today
may not work tomorrow. The smart entrepreneur will not be averse to tinkering
with his system.
(A portion of the conference workbook contains 70 Strategies (and then some)
for an Efficient, Effective, and Profitable Business and Expand Your Profits by
Expanding Your Services. It’s a resource available no where else.)
3. Failure to expand the customer base. Customers are not guaranteed. Even the
best customer can move or change buying patterns. The smart entrepreneur knows
that always seeking new customers to replace the present ones that will inevitably leave some day. Therefore, advertising, marketing, and networking are critical for long-term success.
(Drycleaning & Laundry Institute constantly explores these possibilities through articles and bulletins. The availability of this exclusive information is a key benefit of professional affiliation.)
4. Ignoring the competition. Capitalism is a cutthroat system. Customers are
always looking for the best deal, or at least, a better deal. And if the competition offers better services, they will succeed at your expense. So keep any eye on what your competitors are doing.
(We routine cite that DLI Professional Affiliates prosper and grow at the expense of their non-professional competition. We are always mindful of seeking ways to keep DLI pros out in front by always exceeding expectation.)
5. Poor location. The old real estate maxim – location, location, location – may be
even truer in the small business world. Even the best-run business will have a difficult time succeeding if it is in a poor location.
(One conference section deals with location and demographics. Nothing else will succeed unless your location has all the attributes necessary for a drycleaning operation. Knowing whom you want as your customers and
locating where they are is essential.)