Avoiding Failure

Posted by Tollfreenumber.ORG  at June 21st, 2014

Even the most successful entrepreneurs have watched a business fail before. Usually it’s because they’ve misread the markets or had to face forces outside of their control but at some point in the past most business-owners have faced the big U: undercapitalization. It is the number one reason that most small businesses fail. And it’s not always caused by the market but rather poor planning. Not only can undercapitalization bring down a business but it can affect your personal life as well.

For anyone that’s studied business it’s well understood that when starting a new venture you must have not only the capital required to cover all start-up expenses but also an amount of money equal to the projected revenue of at least the first year of business. This is so that if the business doesn’t do as well as anticipated it will still have enough capital to avoid backsliding on any loans or other debts while still maintaining normal operation. Failure to adhere to this simple rule can result in devastating consequences.

Another thing to keep in mind when starting a new business is your contribution margin (sales revenue minus variable costs). Simply put, in order for your business to break even you will need to generate enough sales revenue to equal the fixed costs of operating the business. If sales revenue is too low a shortfall occurs but if sales revenue is greater a profit is reported. You can plenty of funding but if you don’t understand this basic concept your business will not survive.

Starting a business can be a difficult process so don’t make it any harder than it has to be. Call us toll free at 1-800-951-9411 to talk to one of our marketing professionals and see how you can make your dream business a reality.