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In this presentation we examine the top ten reasons cited by SBA for business failure. Seven out of ten reasons are credit related.
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©2013 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public.
10 Common Reasons for Small Business Failures
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Small Business Survival Rate
2 Years
5 Years
10 Years
15 Years
(7 out of 10)
(Half)
(a third)
(a quarter)
7 out of 10 new employer firms survive at least 2 years, half at least 5
years, a third at least 10 years and only one
quarter stay in business fifteen years or more.
Source: SBA
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Do what you do well
Entrepreneurs must have experience
Be able to anticipate challenges
Possess an awareness of the products, services and the market
Lack of Experience
#10
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“Cash is King”
With tightened lending policies, harder to obtain business loans
Focus on cash flow generation to be properly capitalized
Maintain adequate reserves
Insufficient capital
#9
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“Location, Location, Location”
Understand where target customers work or live
Traffic conditions, accessibility & parking
Relation to competitors
Building condition & curb appeal
Poor location
#8
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Some are tempted to over-buy on essentials
Draining working capital, eroding profit
Make forecast projections
Tying line of credit to these items frees working capital for other needs
Poor inventory management
#7
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Fixed assets are usually always a requirement
Evaluate usefulness and necessitybefore buying them
Consider leasing vs. purchasing
Costly fixed assets may result in poor cash flow
Over-investment in fixed assets
#6
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Negotiate flexible terms from suppliers, avoid late fees
Critical for businesses to ensure terms are clear and easy to understand
Giving customers too much time to pay bills can affect cash flow
Business owners should keep tabs on their business credit score
Poor credit arrangements
#5
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Many small business owners use personal credit
Places the owner at risk
Some business owners use business credit card to cover personal expenses
Consider forming LLC or corporation to shield from personal liability
Personal use of business funds
#4
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Slow but steady growth preferred
Going after all the business can sometimes drain cash and reduce profitability
Sudden ramp-up requires up-front cost of inventories
Causes business to sometimes be less selective, exposing the business to potential credit risk
Unexpected growth
#3
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Creates choices for consumers
Study your competitors
Take the high road to success -trashing the competition is never a good idea.
Focus energy on taking care of your customers
Using business credit wisely - one of the best ways to succeed in a competitive marketplace
Competition
#2
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The ultimate measure of success is sales
Low sales can result from inferior products or services, lack of understanding, mis-reading competition
Overpricing goods and services
Keeping an under-performing sales team
Course correct or fail
Low sales
#1
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Small Business Resources
Find Business Loans
Business Credit Reports
Business Valuation
Bill Payment
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Find a Small Business Loan
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Business Valuation
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Manage Your Cash Flow
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