In this presentation we examine the top ten reasons cited by SBA for business failure. Seven out of ten reasons are credit related.

1. 10 Common Reasons for
Small Business Failures
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2. Small Business Survival Rate
(7 out of 10)
2 Years
5 Years
10 Years
15 Years
(Half)
(a third)
(a quarter)
7 out of 10 new employer
firms survive at least 2
years, half at least 5
years, a third at least 10
years and only one
quarter stay in business
fifteen years or more.
Source: SBA
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3. Lack of Experience
#10
 Do what you do well
 Entrepreneurs must have
experience
 Be able to anticipate challenges
 Possess an awareness of the
products, services and the market
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4. Insufficient capital
#9
 “Cash is King”
 With tightened lending policies,
harder to obtain business loans
 Focus on cash flow generation to
be properly capitalized
 Maintain adequate reserves
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5. Poor location
#8
 “Location, Location, Location”
 Understand where target customers
work or live
 Traffic conditions, accessibility &
parking
 Relation to competitors
 Building condition & curb appeal
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6. Poor inventory management
#7
 Some are tempted to over-buy on
essentials
 Draining working capital, eroding
profit
 Make forecast projections
 Tying line of credit to these items
frees working capital for other
needs
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7. Over-investment in fixed assets
#6
 Fixed assets are usually always a
requirement
 Evaluate usefulness and necessity
before buying them
 Consider leasing vs. purchasing
 Costly fixed assets may result in
poor cash flow
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8. Poor credit arrangements
#5
 Negotiate flexible terms from
suppliers, avoid late fees
 Critical for businesses to ensure
terms are clear and easy to
understand
 Giving customers too much time to
pay bills can affect cash flow
 Business owners should keep tabs
on their business credit score
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9. Personal use of business funds
#4
 Many small business owners use
personal credit
 Places the owner at risk
 Some business owners use
business credit card to cover
personal expenses
 Consider forming LLC or
corporation to shield from personal
liability
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10. Unexpected growth
#3
 Slow but steady growth preferred
 Going after all the business can
sometimes drain cash and reduce
profitability
 Sudden ramp-up requires up-front
cost of inventories
 Causes business to sometimes be
less selective, exposing the
business to potential credit risk
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11. Competition
#2
 Creates choices for consumers
 Study your competitors
 Take the high road to success trashing the competition is never a
good idea.
 Focus energy on taking care of your
customers
 Using business credit wisely - one
of the best ways to succeed in a
competitive marketplace
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12. Low sales
#1
 The ultimate measure of success is
sales
 Low sales can result from inferior
products or services, lack of
understanding, mis-reading
competition
 Overpricing goods and services
 Keeping an under-performing sales
team
 Course correct or fail
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13. Small Business Resources
Find Business Loans
Business Credit Reports
Business Valuation
Bill Payment
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14. Find a Small Business Loan
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15. Business Valuation
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16. Manage Your Cash Flow
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17. Business Credit Reports
 Businesses, accountants and administrators find Experian's business credit
reports and subscriptions to be the best value, giving you the choice to instantly
monitor your business credit reputation, or evaluate business backgrounds and
credit scores.
 Experian has 4 small-business reporting options tailored for your specific needs:
www.smartbusinessreports.com
Business Credit
Report℠
Business Credit
Advantage℠
Business Credit
Pro℠
BusinessIQ
Express℠
• Pay as you go
for a single
credit report on
any business
in the U.S. —
up to $49.95
each
• Monitor the
health of your
business with
access to your
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all for only
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• Access credit
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about other
companies —
all for $150 per
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• Evaluate, rate
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your business
customers and
suppliers — all
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per year!
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18. www.experian.com/b2b
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