It’s a commonly heldbelief thatabout half of small Canadian businesses failin their first year. Fortunately, it’s not true, and small businesses contribute more than 30% to Canada’s GDP.
However, the actual current rate of survival of small and medium-sized companies in Canada has been on the decline. Among all the businesses that enter the market, only 51% last five years, while 85% survive their first year. There are many reasons why.
If you want to succeed as a small business owner, you need to be aware of the reasons why your business can fail.
Image Source – https://bit.ly/2vkrMR5
Why Small Canadian Businesses Don’t Always Survive for Long
Small businesses can fail for many reasons, from not enough preparation going into their creation to bad marketing. According toFortunly, a group of financial connoisseurs providing comprehensive information on financial products and services, 71% of Canadian small businesses fail due to management issues.
What’s interesting is thatthere are some common reasons for the failure ofsmall businesses within the first year:
Starting a small business and the dream of being your own boss come at a price: hard work.
You will need to work much harder than your employees to establish your startup. The responsibilities, such as paying bills and hiring staff, that come with being your own boss are something very few can manage. If you want to know why most small businesses don’t survive more than a year, this is a primary cause.
Many would-be entrepreneurs also don’t have sufficient experience or knowledge. Nor are they detail-oriented enough, which can eventually lead to their failure.
Not everyone has the mindset to be a successful smallbusiness owner. But with proper training, education and a business plan, you can overcome the hurdles.
Lack of a Proper Business Plan
Poor planning, including the lack of a proper business plan,is one of the main reasons why small businesses fail in Canada. (Just to be clear, a business plan is summarized documentation of the operational and financial objectives of your company.)
You can have a vision but making it a reality is another story. In the end, many business owners give up due to a lack of a plan.
Here’s how a well-designed business plan can help your new company overcome the obstacles that lead to failure. Your planning must include:
- Market Research
You may have started your business because you’re passionate about a specific product or like doing a type of work. But it’s not about you;you need to think about your clients first. Remember that a business plan is the ultimate tool to safeguard your business from failure. Before taking the plunge do enough market research to know whether your product/service has a market.
- A Feasible Business Model
It’s your business so you need to understand its profitability. Simply ask yourself: why do you want to invest money, time and hard work into this idea?A proper business model is an essential part of starting your small business.
- A Plan for Growth
Don’t just plan for your business; plan for its success. Many business owners don’t know how to handle success, which is, ironically, a reason manycompanies go out of business. To prevent this, create a transition plan to keep the business moving ahead instead of stagnating.
- An Exit Plan
Establishing a successful small business requires tremendous hard work. But what happens when you’re done working hard? A lot of times, businessowners fail to answer this. But we will tell you. It’s called an exit plan.
If you ever want to sell your business, it must be saleable. But it won’t be if it’s dependent on a single person’s talent and personality.
The exit plan is something you need to have when you’re starting your business, not when you want to sell it.
Lack of Funding or Capital
Let’s address the elephant in the room.Capital is a big concern for anyone trying to set up a small business.
But it doesn’t always have to come from your pocket. There are many different ways to fund a startup. While using your own money may be the simplest way, it’s not always feasible, especially when you need emergency back-up funding.
The best way to fund your small business is to look for many sources instead of relying on one. Personal savings, lines of credit, banks, private investors and even government funding should be on the table. And if you can keep track of all the funding and manage it wisely, there is less reason for your business to fail.
Starting a small business is difficult. You don’t want to spend all your free time working hard only to see it fail. If you want to avoid the untimely demise of your dream company, focus on having a business plan and getting proper funding. Most importantly, never stop learning about what it means to be a small business owner. By following these tips, you will stay better prepared to take on any responsibilities that may come your way, in order to achieve success.