THE TOP 6 REASONS BLACK BUSINESSES FAIL
According to U.S. Census data, new Black-owned businesses are being started at record paces. Between 2001 and 2014, Black-owned businesses grew at a rate that far outpaces any other racial group. Unfortunately, the downside to this rapid growth in new Black-owned businesses has been a record number of business failures.
In this article we will detail the top 6 reasons that Black-owned businesses fail and steps that can be taken to reduce the failure rate.
- Starting Business for the Wrong Reasons:Some of the most often mentioned reasons for starting a business are wanting more spare time (eventually), flexible schedule, no longer wanting a boss, and pursuing your passion. While these are all legitimate reasons, they are not always strong enough to carry the motivation and enthusiasm needed for business success through tough times. They also underestimate what is required for business, especially in the early days. Some key factors that should be considered when starting a business are level of expertise in the industry, amount of capital needed to start up and sustain, and being realistic about how much time and resources will be needed.
Starting a business places a strain not only on the business owner, but families and relationships as well. Before you start a business, make sure that you are starting for the right reason and are prepared to handle all of the many responsibilities of a business owner.
- Capital Shortfall:A mistake that is often made when starting a business is underestimating how much capital is needed and overestimating revenue in the early stages. Starting a business requires not only capital for the purchase of the business, but also needs working capital for such things as inventory, marketing, payroll, office space, etc. Not properly estimating how much capital is needed forces the business owner to make tough decisions about finances more quickly than anticipated and more often than not, those decisions are detrimental to the business.
A good rule of thumb to estimating the amount of capital needed is to double your original estimate. This will provide a longer runway for success and allow the business owner to focus on growing the business without the immediate strain of finances.