Answer 1: I really hate this question. Usually the person shouting it out knows nothing about the small business world and wants to sound all knowing. The better question is "why do small businesses stop being in business?"
There are really two types of small businesses that shut their doors so to speak. The first group and it is the smallest group are the ones that have lots of employees and lots of loans, and can not make it. Small businesses like these are startup restaurants, or other startup retail type of businesses that the owner has not done their homework.
But I would guess that 90% of all businesses that close their doors so to speak (they most likely do not have an actually have a door) do so not owning anyone any money and the owner just gets tired of it.
I have started a lot of businesses and usually as I do the research I find that I do not like the business and then close it. The cost to open the business is so small it does not matter. Or I owned it for a number of years and jut did not like it. so I closed it or sold it. But I did not leave owing anyone any money.
If you really have this fear, which is a good fear to have, then contact me and we can talk about it.
Sam Maropis
Sam@ChartingDreams.com
Answer 2: Sam, above, appears to be explaining why his own many businesses failed, but seems to have missed the question altogether. The question, however, is too broad to answer, except with many other questions...for instance:
What constitutes a failure in a business?
- The T. Eaton Company opened its doors in 1869 with the unique idea of offering people a fair price on merchandise and only one price, no haggling, and thrived for 130 years. It closed it doors due to bankruptcy in 1999, long after the death of its founder...was this a failed business?
- My neighbor opened a tiny fishing equipment store based solely on his love of the sport, with no marketing experience, no research and no hope of surviving a year - he didn't, but he enjoyed it. Was this a failure?
- Another neighbor has run a wine shop at a break-even for many years. She makes no money, but provides a great service to our neighborhood and she loves the work. Is this a failed business?
The question is unanswerable without knowing what constitutes a "failed business". Is it length of time in business, is it profit margin (or lack of profits), is it lack of enjoyment, is it an inability to achieve some goal through the business, is it burning out through too much unanticipated work. These things are in the mind of the individual.
_The U.S. Small Business Administration has seen lots of small businesses come and, unfortunately, go. According to the SBA, over 50% of small businesses fail in the first five years. Why? What goes wrong?
1. Lack of experience
2. Insufficient capital (money)
3. Poor location
4. Poor inventory management
5. Over-investment in fixed assets
6. Poor credit arrangements
7. Personal use of business funds
8. Unexpected growth
9. Competition
10. Low sales
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