In the real world, success can be hard to achieve.  Sometimes enthusiasm and optimism can cloud the owner’s vision of reality and poor decisions are made.

A small business has failed when it is:

• unincorporated and declared bankrupt – a legal process of distributing among the creditors the property of the business or person who cannot or will not pay their debts
• incorporated and either forced into liquidation or voluntarily closes down because it cannot pay its debts and faces a cash flow problem.

If a business owner decides to cease operating because of ill health, the loss of a partner or any other personal reason not associated with financial problems, then the business is not described as a failure!

Small business failure is not usually caused by one single factor, but rather a combination of several factors, the two main reasons being lack of capital and lack of management expertise.  Some of the many reasons small businesses fail are:

• failed to plan
• lack of information
• leadership crisis
• inaccurate record keeping
• failed to delegate
• complacency
• incorrect marketing strategy
• poor location
• lack of financial planning
• negative cash flow
• new competitors
• illness
• supplier problems
• poor use of external support services
• economic downturn
• new taxes
• change in government policy
• insufficient capital
• partnership problems
• lack of management experience
• incorrect pricing policy
• failure to seek advice
• not enough sales
• staff difficulties
• underinsured

Remember:  ‘Small businesses don’t plan to fail, they fail to plan!’