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re: Why do so many small businesses fail?
Posted on 4/22/20 at 3:15 pm to Uptowner
Posted on 4/22/20 at 3:15 pm to Uptowner
quote:
So many small businesses fail for the same reason so many OT threads fail -- nearly anyone can start one.
Yep. Everyone thinks their idea is a great one. People have no objective way of looking at themselves, and it is only made worse by the fact that we are raised to believe we can "be anything we want!"
Look how many clueless people open restaurants or bars with boring or terrible food, no atmosphere, etc.
People generally are really naive. There's a subreddit dedicated to online work, and it is flooded with threads about "HOW DO I GET A WORK FROM HOME JOB??". When asked, "What type of jobs are you looking for? What are your specializations? What is your industry? What did you search for?", the answer is always "Oh, I don't have that. I just Googled work from home jobs".
Well gee. You sound super valuable to a prospective employer
This post was edited on 4/22/20 at 3:18 pm
0
Posted on 4/22/20 at 3:18 pm to supadave3
quote:
I’ve never understood how coffee shops make it. I’ve spent hours in there and leave having only spent $3. I guess the drive thru is the big money maker but none of them can be doing really really well.
1) That $3 coffee costs them like 20 cents to make.
2) The employees aren't paid well, and rely on tips, so labor costs are low
3) Overhead is low. Doesn't really cost them all that much for you to sit at a table in the corner and do work.
Posted on 4/22/20 at 3:21 pm to volod
Underestimating risk .
Posted on 4/22/20 at 3:22 pm to volod
Some people start businesses based on trends. Do you think any “escape rooms” will be around 5 years from now? The coronavirus is actually doing them a favor. Frozen yogurt had a big spike in the 80’s and in the 2010’s. Probably less than 5% lasted from the 80’s to now.
Posted on 4/22/20 at 3:24 pm to volod
In construction supply I would say cashflow. To get the repeat big business you are going to have to extend credit to people and it's not uncommon for people to run you out past 60 days on 10k-15k. Then every once in a while you have one of those guys go belly up and leave you holding the bag.
Posted on 4/22/20 at 3:24 pm to Uptowner
quote:
So many small businesses fail for the same reason so many OT threads fail -- nearly anyone can start one.
based on this I should never attempt to open a business. unless I want to be bankrupt.
Posted on 4/22/20 at 3:28 pm to kingbob
quote:
most businesses just run out of runway before they have a real chance to take off.
This is it. Most people that start businesses have more money than brains. They forecast the rosiest of predictions and when things are just normal or bad, they haven't given themselves enough leeway to sustain at that point
Posted on 4/22/20 at 3:34 pm to volod
I think a more interesting statistic would be based on failures by size. In 2015, the "small business" categories were broken down as follows:
*Employer firms with fewer than 500 workers employed 46.8 percent of private sector payrolls in 2016.
*Employer firms with fewer than 100 workers employed 33.4 percent.
*Employer firms with less than 20 workers employed 16.8 percent.
A lot of the comments/reasons being given on the failures are associated with firms with less than 20 workers (or 16.8 percent of the small businesses).
*Employer firms with fewer than 500 workers employed 46.8 percent of private sector payrolls in 2016.
*Employer firms with fewer than 100 workers employed 33.4 percent.
*Employer firms with less than 20 workers employed 16.8 percent.
A lot of the comments/reasons being given on the failures are associated with firms with less than 20 workers (or 16.8 percent of the small businesses).
Posted on 4/22/20 at 3:51 pm to 1BIGTigerFan
They also underestimate the time it takes to open. If you have 3 years worth of funding and know it will take roughly 2 years for the business to be in the black, but the government f$&ks you on your permits delaying your opening for another 6 months while you’re leasing your space, the business is effectively throttled in the womb. I can’t tell you how many times I’ve seen this in BR the past few years. Business leases a brick and mortar location intending to do minor renovations and open in 4 months, GoVernment f$&ks them and they’re stuck waiting on permits and licenses forever, finally open almost a year past their original targeted opening date, close within a year after that because they run out of runway. The government eats the runways of tons of businesses everywhere every year.
Posted on 4/22/20 at 3:55 pm to volod
quote:
Why do so many small businesses fail?
No business plan. No proforma. No ability to adjust. Lack of capital. No emergency fund.
Posted on 4/22/20 at 4:37 pm to Will Cover
quote:
No business plan. No proforma.
You think people would put up a lot of their own money without doing these two things? Or are you saying they don't adequately do them or their projections are wrong?
This post was edited on 4/22/20 at 4:38 pm
Posted on 4/22/20 at 4:38 pm to volod
People don’t come and buy their products or services
Posted on 4/22/20 at 4:45 pm to volod
They don't know what they're doing and don't know how to run a business. I am the 4th generation to run my business, I was raised in it and I'm still learning. Business was humming along this winter, glad I was pessimistic or I would be closing the doors. Good times or bad times don't last.
Posted on 4/22/20 at 5:14 pm to 1BIGTigerFan
quote:
No business plan. No proforma.
quote:
You think people would put up a lot of their own money without doing these two things? Or are you saying they don't adequately do them or their projections are wrong?
Many of the eones I have looked at seem to be based on everything working perfectly which never happens.
Posted on 4/22/20 at 5:21 pm to volod
quote:
Why do so many fall off after their 5th year.
Some businesses are just made to write off losses and you can only do that so long. But if you let the original business dissolve and then start another business, you can write off the losses again.
At least that was how it was explained to me
Posted on 4/22/20 at 7:47 pm to volod
They don’t have anybody to money launder for.
Posted on 4/22/20 at 7:57 pm to volod
Without reading I’m guessing this is race related?
Posted on 4/22/20 at 8:57 pm to volod
Because everything looks easy until you try it. The hardest working person in a small business is the owner they are on call and on the job 24/7.
Posted on 4/22/20 at 9:39 pm to LSUFanHouston
quote:
1) That $3 coffee costs them like 20 cents to make. 2) The employees aren't paid well, and rely on tips, so labor costs are low 3) Overhead is low. Doesn't really cost them all that much for you to sit at a table in the corner and do work.
Labor costs would be the highest. That or base rent. The opex, cogs. The bottom line is based on volume for a coffee shop. Those big product margins mean nothing unless they meet the contribution margin by volume of sales. Not good right now.
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