Business Tips:
May 21, 2003 - Comments by James Koch, President and CEO / KOCH Consulting           Back to Current Business Tip

>Why do so many small businesses fail?

It is a sad statistic, but it is so true. Many more new small businesses fail than make it past the first two years. Most of these failures can be attributed to one or more of the following omissions:

  • Planning - developing a business plan and adequate planning for all areas – not just sales or production. This includes pro forma financials, budgets and forecasts. Most new business owners fail to get help at this early stage.
  • Under-capitalization – probably the single most common reason for all small business failures. A new business needs adequate capital to operate until the business is able to make a profit. This takes a serious business plan and accurate forecasts.
  • Cash management - failure to maintain adequate accounting records and proper monitoring of cash. Many small businesses operate from inception to failure without a daily cash report or bank reconciliation.
  • Over-leveraging - closely related to under-capitalization. To much debt will wreck a business faster than anything else. Anyone proposing to start a new business should get independent advice regarding how much debt to carry.
  • Time – it is difficult to start, manage and successfully operate a small business on a part-time basis. If you have one employee, you cannot properly manage that person if you work part-time.

If you are planning to start a business (or if you are planning to buy an existing business) call us before you begin. We can help you in all the areas mentioned above. Our fees are reasonable and the return on your investment is excellent.

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