4 Ways to Keep Your New Business From Failing

According to the U.S. Small Business Administration, roughly a third of new U.S. businesses fail in their first year, and only half are still in business after five years. Possible reasons for the failure rate include cash flow problems, ineffective marketing, and an entrepreneur’s own fears about succeeding.

“We need to discuss ways to reduce this staggeringly high number,” Michael Wilson, AFFLINK senior vice president of business development, said regarding the topic. “Fortunately, it is doable.”

Wilson offered the following four suggestions to help prevent a business from failing in its first year.

1. Have a business plan. According to the Harvard Business Review, entrepreneurs with a formal strategy are 16% more likely to succeed. Rather than seeing a business plan as a burden, view it instead as a road map to successfully growing and retaining your business.

2. Master money management. Entrepreneurs must focus on how much money is coming in and how much is going out, if they want their company to be successful. From the get-go, they should have a cash reserve of at least three to six months for operating expenses, in order to weather any possible downturns.

3. Monitor employee performance. To properly evaluate employee performance, set clear goals in writing regarding what is expected of each employee in every position. Invest in employee training and development, and conduct regular employee evaluations. These evaluations will further help the owner and management better understand how to monitor employee performance.

4. Keep your eyes on the future. Many new entrepreneurs just focus on daily tasks and putting out fires. Doing so could cause them to miss opportunities.

“We can list other reasons why new businesses fail,” added Wilson. “But invariably, it comes down to a lack of planning. To survive, have a plan and focus on the future.”