Did you know? 69 percent of U.S. entrepreneurs start their business at home. Of all small businesses started in 2014, 80 percent made it to the second year, 70 percent made it to the third year, 62 percent made it to the fourth year, and by the fifth year, only 56 percent made it. Here are the top ten causes of small businesses failing:
- No market need: 42 percent
- Ran out of cash: 29 percent
- Not the right team: 23 percent
- Got outcompeted: 19 percent
- Pricing / Cost issues: 18 percent
- User product not friendly: 17 percent
- Product without a business model: 17 percent
- Poor marketing: 14 percent
- Ignore customers: 14 percent
- Product mistimed: 13 percent
Small businesses of all kinds are the backbone of the economy. When starting a small business, you want to be almost certain your new business is going to do well. Many new business owners ignore red flags when operating. Here are some dangers many new business owners ignore.
Underestimating
New business owners tend to underestimate two things — how much something will cost, and how long something will take. A good rule of thumb is to set aside MORE than enough money and make sure when you are planning you budget plenty of time.
Lack of Money
Running out of cash is the biggest danger to any business. Many businesses fail due to lack of cash, not necessary sales. Few business owners focus enough on their cash flow, instead they spend most of their time on increasing sales. Owners should focus on solutions that will ensure strong cash flow — like offering shorter payment terms to customers/incentives to pay quickly, gaining access to bank credit lines when needed, and obtaining longer credit terms from vendors. New businesses often take on too much debt without a clear purpose for the money. This racks up unnecessary expenses. New businesses need to minimize expenses while maximizing cash flow to make it.
Being Mentally Unprepared
Many new owners are so focused on their business, they neglect their own mental health. If you are not practicing the mental tools needed to persevere in your business, it will now matter how prepared you are analytically. Your mindset ALWAYS has to match your intention.
Not Fully Understanding Small Business Insurance
Your job isn’t insurance, and knowing the nuances and finding the perfect match of cost and coverage is imperative. Did you know you’ll need a certificate of insurance to get a lease? Your first issue is making sure you’re in compliance with the insurance requirements in your lease. Insurance agents, like the ones at Honig Conte Porrino, can review the insurance provisions in your lease so we can put together a program that suits your needs. Here are some coverages your new business may need:
- Cyber Liability can help protect you against cyber extortion situations like this as well as data breaches, security breaches, website liability, identity theft and more.
- Professional Liability can cover you and your employees for negligence claims like these and other situations.
- General Liability can protect you against claims made against your business for things like medical expenses.
- Workers Compensation can cover the cost of employee medical treatment, expenses related to their recovery, and lost income.
- Employment Practices Liability can cover you for lawsuits from employees, ex-employees, interviewees, vendors and contractors.
Why Work With an Independent Insurance Agency?
Honig Conte Porrino has worked with New York City small businesses of all types and we understand the industry and the challenges you must overcome to succeed. (We should, HCP has been doing this for more than 100 years!) Continuity is another benefit of working with us. Many of our employees have worked with us 15, even 25 years, and make their career here. You get to work with the same person year in, year out. No need to initiate someone new to how your company works.
