Top Eight Causes of Business Failure - Number 7

[John Krech]

Number 7: This is the second in a series of eight posts concerning the top causes of small business failure. We will work our way up to the number one cause; however each one is an important issue for any small business to consider. This week’s post is on personal use of business funds being a cause of failure. While this seems like a no brainer and implies something criminal, it really gets at the issue of financial control and realistic business planning.


Many small businesses fail because due to a lack of reasonable level of accounting and accounting practice integration. As a result, they suffer from the lack of financial control and consequently cash flow problems force the business to fail. If you have weak finance and accounting skills, then you should employ a competent bookkeeper (not necessarily qualified) to manage the accounts regularly. Virtual assistants and bookkeepers are a great option. If you are a business on a tight budget, there are many technology tools that can get you on the right foot and minimize the amount of consulting required. The SBA’s Small Business Development Centers provides a great list at on their information clearinghouse SBDCNet. There are many organizations that provide free access to advice as well as offering courses to increase your knowledge, such as SCORE and the SBA’s SBDCs.


Beyond financial control, this is really an issue of realisitic planning. With any business, money is needed for both the business and your personal needs. Build into your business plan salaries for yourself and any of your founders that will be assisting with the start-up. Too often founders have the impression that they will be getting all the profits. Remember, unless it is part of your salary, it belongs to the business, don't forget it! Profits can be long in coming so forecast your costs to include enough for you to live on. Profits often take longer that you anticipate – develop a contigency plan. This will show you what you need in money to survive the early months or years before break even and profit. The same resources noted above apply here, specifically SCORE and the SBDC's are great resources for this topic as well as the tools available on SBDCNet.

[Hisham A. Eid]

John Great write up thanks for the sound advice.
You mentioned SCORE: Their free business toolbox is a great resource for counselors and their clients ( http://www.score.org/business_toolbox.html )
Any advice on choosing the right "Virtual Assistant" for the job? I assume you mean software similar to Quick books.

JonasZ: What does NPD have to do with the original posters topic?

[JonasZ]

Business requires to celebrate NPC..Take time to celebrate National Punctuation Day. It seems that National Punctuation Day would be a holiday that will make the respective buildings containing the home offices of Facebook, Myspace, and Twitter on fire, because hardly anybody on those respective websites seems to know what punctuation, or grammar is. It's a fake holiday, like so many other holidays are, but this one at least highlights something concrete, but also a growing problem in that a growing number of adults are functionally illiterate, and people are learning the majority of their written communication skills with text messaging. Maybe a personal loan to celebrate National Punctuation Day would be worth it.