Do You Know How Small Businesses Crash and Burn?

By Hannah Whittenly

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Sadly, the vast majority of new small businesses fail within the first year of operation. While this can be a depressing fact for many would-be-entrepreneurs, still other small businesses have been able to find massive success and were later able to grow into huge national chains.

If you want to achieve that kind of success, you must first know how to avoid the pitfalls that most new small businesses fall into. Here are five problems you must be sure to avoid if you don’t want your company to crash and burn.

Cash Flow Problems

Cash flow problems are some of the most serious issues affecting small businesses. When your company has razor-thin profit margins, things like client payments becoming stalled and sudden and unexpected outgoings can pose serious problems. Overall, the best solution to cash flow issues is more streamlined management. Cash flow management software and apps can be a big help to insure a small business owner doesn’t feel overwhelmed. Online invoices can also help remind clients to pay your promptly.


While many financial problems are huge issues, the human component of being a small business owner cannot be ignored. It is true that owning a small business is much more than a fulltime job. Still, if you overdo it, you may end up burning yourself out completely and causing the company to suffer as a result. Make sure to take care of yourself. Get plenty of sleep, eat well, exercise, and do activities in your spare time to keep you motivated.

Taking on Too Much Debt

As an adult, you should be accustomed to dealing with bills and debt. Good financial health means paying off debt quickly to avoid crushing interest. Running a small business is no different. During the early stages, you may need to take on debt in the form of things like bank loans and business credit to get up off the ground. However, make sure you have a strong plan to pay this debt off quickly and become financially self-sustainable without the need for future borrowing. If you do, you can see your profit margins soar. If you’re having trouble with paying off your debts, make sure that you talk with a debt collection attorney to see what options you have.

Inability to Find and Retain Customers

Without customers, a business simply cannot exist. Do enough research before you even launch to determine whether or not there is a market, untapped or not, for your product or service. Keeping customers once you find them is another issue entirely. According to research, well over 80 percent of consumers say trust and likability are the most important factors in regards to what businesses they remain loyal to. As such, you must make excellent customer service a cornerstone of your company culture.

Too Much Overhead

According to Investopedia, overhead refers to business costs apart from labor, materials and expenses billed to customers. You can think of overhead as the cost of opening up the doors of your business each day. If there is too much overhead, it can bleed your finances out via a death from a thousand cuts. There are two solutions to high overhead. You can either raise the price of products to compensate or find expenses to eliminate. Focus on slashing expenses that do not have a negative impact on customer satisfaction.

Owning a business is not an activity that is without risk. However, if you become more educated by studying the failure of other small businesses, you can certainly increase your chances of finding long-term success.


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