Why Do Businesses Fail In The First 12 Months?

On Behalf of Ezell Law Firm, LLC

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Jun 25, 2024

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Business Formation

The first year can be very tough on a business. It’s common for startups to fail. Perhaps you live in a town with a retail location that seems like it’s constantly changing hands, with a new business in the space every couple of years.

If you’re considering starting your own business, it is important to think about why others fail. This isn’t to say you should reassess your plans or decide that you don’t want to start your own business in the first place. You just need to know why other businesses run into problems so that you can avoid mistakes and give yourself the best chance of success.

It’s a bad location

One of the major reasons why businesses fail quickly is because the location just doesn’t work. For instance, say that you open a high-end steakhouse in a part of town where no one can afford it. The food may be delicious, but it will not sell.

The company grew too quickly

In some cases, the company will fail because it expanded too quickly. Things seem successful for the first few months, and the business owner tries to capitalize on this by quickly opening other locations. But they end up spreading themselves too thin, and a small financial setback can sink the company.

They run out of money

There are a variety of ways to finance your new business. You could find personal investors, use crowdfunding, take out a business loan and much more. But no matter which option you choose, if the financing runs out or there are cash flow problems, that can cause the business to fail.

Along with avoiding mistakes, be sure you also understand the legal steps you’ll need to take at this time to give yourself the best chance of success.