Reasons Your Business May Fail

Some businesses do fail. Most owners do not want to imagine a scenario where their business might actually fail. While this is understandable, consultants with Corporate Business Solutions encourage business owners to imagine scenarios that may lead to failure. It’s important to keep failure in mind when running a business to avoid making a fatal mistake. Here are several situations to keep an eye on that usually cause small businesses to fail:

Not tracking cash flow – Many small businesses we review track sales, but not the cash flow. A business owner should always know how to predict the cash needs of the business going forward. Now, sales might have increased, but how did that affect the cash flow? Some businesses increase sales and also other expenses along with it, which can result in a cash crunch. If your business is not tracking monthly cash flow, then it could be on the way to failure by not being able to pay all expenses when they are due, including payroll.  If you can’t pay your bills on time, it can lead to punitive actions by suppliers which can have a snow ball effect on the business.

Spending too much on products – We do not recommend businesses invest on a product, service or infrastructure on the basis of “hopium”.  Business investments must be based on realistic sales numbers which indicate the market worthiness of the product or service. Businesses should develop minimum-risk products first. Then, make sure the product is actually profitable before proceeding to further investments.

Overspending on appearance – Appearances are important in the business world. But it can also get out of hand. More often than not, small business owners tend to overspend on leasing office space at fancy addresses, buying expensive furniture, sending partners on over-the-top business trips, and the list goes on. Spending a lot just to appear successful could lead to serious debt. Failure to control costs is one of the most common reasons small businesses fail. We recommend keeping things humble until the company actually has solid sales numbers to justify additional expenses.

Avoiding business taxes – Small businesses must be aware of all taxes related to running a business, such as payroll taxes. Avoid the temptation to solve cash flow problems by not paying payroll taxes on time. Failure to pay taxes can lead to costly penalties and could even lead to a shuttering of your business.

Overpromising – Do not promise customers or partners things you cannot deliver. Your company will be expected to deliver as promised, and if you cannot, the business will not survive.

Afraid that your business may go broke or fail due to any reason? Contact us at to fix the problems and ensure the continual survival of your company.


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