Discovering why small businesses fail is a smart way to avoid falling as a victim, it helps to uncover weaknesses and begin to build up some strength before you invest to become self-employed. The question is: Why do they fail and what can I do to prevent problems in my own business?

¥  Mistaking a Hobby for a business: Just because you love something doesn’t mean you should convert it into a business. Too often businesses fail because the owner feels their passion is shared by others. Research your business idea and make sure it’s viable.

¥  Poor planning: Yes, you must have a business plan. It can be a simple three-page plan or a huge 20-page plan. The point is that you’ve looked at all the aspects of your business and are prepared to handle problems when they arise. Your business plan helps you to focus on your goals and your vision, as well as setting out plans to accomplishing them.

¥  Entrepreneurial Excitement: Entrepreneurs often get excited about new ideas, but are unable to determine if they’re “true opportunities” and/or put them into practice. Test every new idea against your business plan and mission statement before deciding whether to undertake it or not.

¥  Putting all your eggs in one basket: Too often, small business owners will have just one product, one service or one big client. They cling tight to this one thing because it brings in good revenue. But what if the one thing disappears? Variety and diversification will cushion you against the ebb and flow of business tides.

¥  Poor record keeping: Yes, you have to keep financial and business records, you have to review your revenue and expense report each month, and you have to file taxes and other business-related filings. If you don’t know how to do these, or don’t want to, get help from someone who does.

¥  Lack of experience in running a business or in the industry you’re entering: You have to understand your industry, the skills required to offer your products and services, and the trends in the industry. If you don’t know about these basic skills, educate yourself. Talk to others who are successfully running their own businesses, talk to industry leaders, get a book, find a website, get a coach, do your homework

¥  Poor money Management: You need to be able to live for one to two years without income when getting started; often businesses are very slow to get off the ground. Also, you have to create and use a realistic business budget, and not constantly drain the business income on personal spending.

¥   Poor customer Service: Once you have a customer, you have to keep them. There are two key points here – make sure you pay attention to what the customer wants (and how these wants can change over time), and make sure you provide quick return of phone calls and emails, proper billing, win-win problem solving and an overall pleasant demeanor.

¥   Over Speeding & Poor Capital structure: Many startups spend their seed money before cash has begun to flow in at a positive rate. This often happens because of misconception about how business operates. If you’re just starting out in business, seek out seasoned veterans you can bounce your ideas off of prior to making big financial commitments. Look at the businesses that fail and you’ll find that many of them took on too much debt. Learn to pay strict attention to your finances and keep careful records of all money coming in and going out.