Nobody opens a business with thoughts of failure. We do it for the challenge, independence, earning potential, or love of sharing our products, services, or ideas with others. We want to impact the world!
And yet, only 66 percent of businesses with employees will survive their second year. That’s far too many people enduring the pain of a major financial setback, not to mention a broken dream. And it doesn’t have to be that way.
So why do so many businesses fail? After 30 years in finance, and a nearly failed business of my own, I believe the primary reason businesses go broke is that they fail to master their cash flow.
Remember “Animal House”? “Roadtrip!” When we’re young, it’s exciting to be spontaneous and fly by the seat of our pants — just hit the road with no reservations and see what happens. It’s exhilarating…for a while.
What amazes me is when people, especially business owners follow this approach. Hey, I was one of those business owner!. I didn’t have a plan in writing for the first five years I was in business, and in retrospect that was a big contributor to my business almost going under. According to the U.S. Bureau of Labor Statistics, about 20 percent of small businesses fail within their first year. By the end of their fifth year, roughly 50 percent of small businesses fail. After 10 years, the survival rate drops to approximately 35 percent. Want to be one of them?
