Why Many Small Businesses Fail

Several studies have been conducted on the cause of failure of small and medium enterprises. Said and Hughey pointed out in a 1977 report that the five problem areas that SMEs lack management capacity are cash management, personnel management, records management, product sales and tax planning. Dickey (1994) pointed out that SMEs will fail if cash flow management is not appropriate. When a business starts or expands, funds should not be reserved as profits by the owner but should be invested in the business. In the Small Business Consultant (1999) article, the main reasons for SME failure are poor customer relationship, poor employee relations, lack of employee training, and low budget.

According to the US Bureau of Labor Statistics, the quick answer to the failure rate of SMEs is that about 20% failed in the first year and about 50% of SMEs failed in the fifth year. But it is also useful depending on how small US small business survived. According to the dynamics of business employment of the Bureau of Labor Statistics, this seems to be life expectancy. These ratios are consistent over time. Surprisingly, this shows that economic factors have little impact on the survival rate of US SMEs. Here I would like to say that you can believe in survival rates of 80%, 70%, 50%, 30% in 1 year, 2 years, 5 years, 10 years regardless of the year.

Looking at the proportion of failed small business, the US small business sector looks completely pessimistic. But according to more statistics, US small and medium enterprises still exist and shows that it is good. If you are disappointed with the prospect of starting a small business, remember these five statistics. According to a study by American Express between 1997 and 2017, the female entrepreneurial spirit increased by 114%. There is still a long way to do gender equality in the field of entrepreneurs, but the business owned by women has a much longer period than the company owned by men. The power and perseverance of female entrepreneurs

If you retreat from these small business statistics, the main idea is the difficult job to run small business - and the proportion of failing small and medium enterprises is proof of this. There are many reasons for small business failures, but generally pay attention to sources of cash and cash flow - these are often turning points for business failures.