Small business owners nationwide have likely noted that the economic recovery of the last few years may have been widespread, but certainly hasn’t been uniform. For this reason, it’s important to note that some independent firms are still having trouble getting their feet under them, especially if they’re relatively new.
Plenty of data suggests that seemingly no matter how hard small business owners work, they aren’t all going to have success, according to a report from the Huffington Post. In fact, the most recent data suggests that only about 400,000 such companies are started every year, while 470,000 fail. That’s a big swing from the pre-recession boom years, because back in those days, about 100,000 more companies were being started than being shuttered.
What happens to these companies?
So it’s important for entrepreneurs to know the reasons why companies of this size tend to fail, the report said. Polls show that the biggest driver of this kind of issue is the fact that companies simply don’t always know how much money they’re going to need to continue operating successfully, and therefore run out before they thought they would.
Another major issue for such firms is that companies think they may be better positioned for success than they really are, and therefore dramatically misjudge their ability to bring in money, the report said. For this reason, entrepreneurs who are thinking about starting companies or owners who are already well-established in their communities but happen to be considering new offerings might want to think about going slowly with their plans, instead of diving in headfirst. Similarly, it’s important for products or services to be offered at a smart price point, which can occasionally be a problem because owners might overestimate demand, or overvalue what they provide to prospective customers.
Owners who want to make sure their companies are as poised for success as possible may want to consider the ways in which they can reduce their various ongoing costs. Often, this might include hunting for ways to find more affordable small business insurance coverage. For instance, cutting expenses on errors and omissions insurance could end up saving a firm thousands of dollars annually, which could then be put toward improving other aspects of the venture and keeping a solid financial foundation in place for when other needs happen to arise.