Inadequate planning.
It is of the utmost importance that adequate consideration is given to planning when starting a small business. The initial planning stage should include discussions with a financial institution, solicitor and professional accountant. Lack of professional advice (especially from Accounting Firms) when a small business is being commenced. This is one of the most significant reasons for the high failure rate of small business
- Insufficient capital at commencement of business
- Inadequate management especially in the areas that are not the strong points of the owner/manager
- Ineffective bookkeeping systems
- Adverse accounting systems to highlight performance results
- Lack of understanding of the term ‘cash-flow’ and the significant role it plays within the business’ operation, in particular to the payment of GST (Goods and Services Tax) and PAYG (Pay As You Go) tax
- Insufficient capital for growth and expansion
- Over-dependence on debt financing
- Poor cash management
- Deducting funds from business income, especially in the beginning. Living too high!
- Not understanding the meaning of profit
- Poor debtor, stock and work in progress control
- Inadequate bank relationships
- Poor location
- Unsuccessful choice of a partner
- Failure to delegate
- Implications caused by larger exterior organisations
- Disinterest by owners (often the second generation)
- Owner’s inability to lead a management team – need for people management
- Lack of sources of equity finance for “larger” small firms
- Failure of owners to provide for succession
- Not allocating adequate time to address potential problems and solutions faced by the business
- Not separating spending on personal needs from business
- Poor staff relationships – Lack of acceptance of the need to build a committed staff team
- Lack of contact with major customers
- Not determining what business you are really in
- Not understanding the market
- Need to be careful with the employment of relations
- No formal Business Plan
- No Budget of Cash-flow Forecasts
- Lack of effective outside advice
- No strategic planning sessions
- Having not developed empathy with customers
