Factors of failure and success of a small business

Starting a business can be the key to financial independence or the road to ruin. The statistics for start-up companies are certainly disappointing, with 90% of new companies closing their doors forever.

According to Entrepreneur magazine's Elizabeth Wilson, while some 40 million businesses are started each year, a minimum of 350,000 go out, and begin to grow and make money.

Making sure your own company is in the top 10% means avoiding some common business pitfalls.

Underestimate startup costs One of the most common mistakes that business owners make is to underestimate the amount of money they really must invest in order for the business to work.

Some initial costs are predictable, such as the cost of a new building or the rental of equipment. However, other costs are less easy to anticipate, and companies that are not accountable for those surprises may find themselves without cash just when they need it most.

Business owners tend to underestimate both the upfront costs and the costs associated with acquiring and maintaining customers.

When costs are underestimated, something as simple as the collapse of a key piece of manufacturing equipment could leave a new startup unable to operate and unable to pay its bills.

Relying too heavily on others The departure of a key employee, or a disagreement with a business partner, can leave the company in a difficult situation, unless the business owner has taken the time to learn all aspects of the company.

Relying too heavily on a handful of key workers can be a big mistake, and could even lead to business failure.

Regardless of the nature of the business, it is essential that the owner understands the variety of jobs and functions within the organization.

This will allow the business owner to intervene if necessary, even if that means driving a delivery route when the messaging service closes unexpectedly or finding a service for a server when the IT person is ill.

Hiring the wrong people For your clients, the people you hire are the business, and hiring the wrong people can be a costly mistake.

Unlike not providing enough initial cash, the problem of hiring the wrong people can come back to haunt the business over and over again.

Many new business owners are so eager to get the business off the ground that they fail to check important backgrounds and background checks.

The same problem can occur when the business begins to grow rapidly. When the company wins new contracts and undertakes new projects, the company may need to rapidly grow and attract new workers.

This can increase the chances of hiring a bad worker who could ultimately harm, rather than help, the success of the business.