There were about 146 000 business start-ups per year and an average of 12,000 bankruptcies per year between 1994 and 2004 in Canada. A 2004 study by Statistics Canada in small business failure rates "Small Key Business Statistics – January 2005: How long do small businesses survive?" found that the early years were critical. While nearly three quarters of small business start-ups survive the first year, less than a third of micro (fewer than five employees) were in business after five years.

These statistics can in themselves be of little value to you directly. We know how many small businesses to survive and for how long, but it is much more important to know why some survive and others do not. There are plenty of studies in case of failure of small businesses. Search for "reasons for failure of small businesses", with citations in Google will give about 700 results (about 38 million without it!). "Why small firms do not" give you almost a thousand.

The 1997 study by Statistics Canada "A lack of concern: business bankruptcies in Canada are the main internal factors of small business failure is poor management, financial management problems and poor marketing.

The Small Business Administration study, "The financial difficulties of small companies and the reasons for its failure in 1998 are several causes of the bankruptcy of small enterprises, the conditions outside the company (38.5%), financing (28%), in business conditions (27.1%), taxes (20%), disputes (18.8%), personal calamities and other (32.9%)

There a lot of information on this topic, but what are the common factors? There are four basic areas:

External factors

External factors include the new competition, its main client moving out of town, the weather, if you are a seasonal business or economic crisis. They are often largely outside our control, and may be unique to each individual company, but often there are ways to mitigate them. For example, if you have a seasonal business, such as a landscaping company (at least here in the cold north is in season) you could buy a lynx to generate revenue during its season with snow removal. The conclusion is, having a contingency plan for external factors that could have a negative impact on the success of your small business.

Lack Management

Large companies can afford to hire several people to get all the work to be done, but chances are you're going to have to do everything yourself, at least for a while. This means that not only will have to develop your product or service, we will also having to exercise, accounting, legal, marketing, human resources and purchasing decisions.

You can do some of these tasks very well, but unlikely that you do all these tasks well, and even if you do, you may want to contact a lawyer and an accountant at least. And research, research and research a little more, and when done the research, find an expert or two bounce ideas and give sound advice.

Lack planning

Small businesses often fail because of lack of planning. Let me make a bold statement: the most vital to their success in business is your business plan. Why? In short, his business plan lists specific and concrete goals for the coming years. Detailed, step by step, how you will achieve those goals, and gives you something to measure their performance against the end of its business year.

Finally, a plan complete business helps you get funding and includes a marketing plan that addresses the lack of marketing and inadequate funding, two most often cited reasons for the failure of small businesses.

I have one more thing to say about business plans. It does very little good to write a business plan, put it in a drawer and never look back. That same 1997 study by Statistics Canada have spoken to the success are small business owners and refer to revise their business plans often.

The lack of marketing

Most small businesses seem to think that you need a lot of money to market your product or service effectively. That is simply not true. There are many inexpensive ways to market. You can use direct mail marketing which is as cheap as a stamp, or e-mail marketing, which costs nothing. The point is, what you need for your product or service "out there" in some way. You can have the best product or service out there, something totally unique from anything else, but what good is it do if nobody knows?

So there you have it – my thoughts on the main reasons small businesses fail, and how to avoid becoming a small business statistics failure by developing a contingency plan to consult with experts, and the development and use of a business and marketing plan.

If you are thinking of starting a small business, I am certainly not trying to discourage. I sincerely believe to be in business for himself, can possibly be more rewarding career there, but a little knowledge can go a long way toward armed against the failure of small businesses.

Critical Issues in Business Success and Failure

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