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Why do Start-ups Fail?

“Once you've hit five years, your odds of survival go way up. Only two to three percent of businesses older than five shut down each year.” David Birch - MIT

The stats are scary! 50% of all businesses fail within 5 years. Why? I've listed 10 reasons below. Can you think of more?

1.Lack of experience
2.Insufficient capital (money)
3.Poor location
4.Poor inventory management
5.Over-investment in fixed assets
6.Poor credit arrangements
7.Personal use of business funds
8.Unexpected growth
10.Low sales

Here are a couple of books if you are interested in learning more:


Deena Houston said...

I know this is old, but I'll keep this in mind because I plan on running my own business soon. I know it'll be tough, so I can use all the help and advice I can get. More recently I've been thinking about buying a business instead of starting one from scratch. Maybe a franchise? Home based? I’m not sure. Do you have any suggestions? Advice? Thanks.

Manny said...

It really depends on your line of business; how much time/ money you have to invest;your personal contraints (family, travel, etc). There are so many "get rich quick" schemes out there that you really need to do your homework around this. I would suggest speaking to as many people as possible. This will help you formulate a plan for your self, that you can then take to experts in your field of interest to help you reach your dreams. Good luck.

Deena Houston said...

Thanks for your help, Manny. I really appreciate it. I've been doing more research, and it's been helpful. I think I might join a small business group or something, and I did manage to find a potential business to buy on The economy might be very shaky right now, but it'll get better, and hopefully by the time I get the ball rolling. Thanks again.