Beating The Odds

Remembering the basics of business can help

10 reasons small businesses fail (nine of which are mentioned in this article), and what entrepreneurs can do to avoid putting an “out of business” sign on the door.

  • Don’t procrastinate. When you own a small business, you will find that tasks and paperwork pile up. Avoiding them is similar to piling up debt; eventually it can overwhelm even the most proficient business owner.
  • n Never ignore the competition. Customer loyalty has consistently dropped in recent years. Customers go where they can find the best products and services, even if that means terminating long-term business relationships. Monitor your competitors and don’t be ashamed to duplicate their ideas.
  • Avoid sloppy or ineffective marketing. Market your product or service effectively and diligently. Solid marketing keeps your products selling and keeps money flowing into your business.
  • Never ignore customers’ needs. Once a solid customer base is formed, savvy entrepreneurs must work hard to maintain it.
  • Look for competence. Hire only the best and most skilled workers. Happy employees are good, productive workers.
  • Be versatile. Successful business owners tend to be adept at a number of tasks and can offer diverse services and products to clients.
  • Scout your location. When scouting for a location for your business, assess its convenience to potential customers.
  • Watch your cash flow. Keep careful track of the money coming into and out of your business. Monitor spending and learn how to create cash flow.
  • Keep an open mind. Read books and magazines about small businesses, visit business-related Websites, network with peers in the business community, and continually expand ideas.
  • The National Federation of Independent Business (NFIB), a Washington, D.C., advocacy group for small and independent business owners, surveys its members on a monthly basis to get their outlook on the future of small businesses. According to a special edition of its monthly report, Small Business Economic Trends, small business owners’ optimism tumbled to its lowest point since 1993. The New York and Pentagon attacks on September 11 appear to have made owners more pessimistic about the economic future. “This event has truly shaken the system, and only time will tell if that shock does long-term damage,” says NFIB Chief Economist Bill Dunkelberg.

    While the suggestions of how to avoid the pitfalls that trap many entrepreneurs are cogent and plausible, the question remains: Why do businesses have such a high failure rate? African American applicants for small-business financing are denied credit twice as often as whites with similar creditworthiness, according to research by the Federal Reserve System. The gap is conspicuous in mortgage lending, where redlining practices have plagued minorities for years. A study by the National Bureau of Economic Research found loan-denial rates of about 27% for whites and about 66% for blacks.

    Despite the bleak success rate, some future entrepreneurs are undaunted and still cling to the dream of becoming their own bosses. Charles McNear IV, an undergraduate business student at Temple University in Philadelphia, says that understanding business practices is the key to a booming business.

    “I hope to own my own business one day,” McNear says. “But first,

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