According the SBA more than half of all new business will fail within their first four years of operation. In contrast, over 90% of all new franchises will survive for more thanĀ 7 years. While no new business venture comes with a guarantee for success these statistics do show that chances of success with a franchise start-up are considerably greater than an independent start-up. Here are some of the typical reasons why business fail and how a solid franchise can help entrepreneurs avoid these costly mistakes.

  1. Under Capitalization
    A common fatal mistake for many failed businesses is having insufficient operating funds. Business owners underestimate how much money is needed and they are forced to close before they even have had a fair chance to succeed. They also may have an unrealistic expectation of incoming revenues from sales.
  1. Poor Management
    Many reports on business failures cite poor management as the number one reason for failure. New business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees.
  1. Inexperience
    Whether inexperience lies in dealing with the intricate functions of all business or in the business niche itself, a lack of experience is a top reason why many new businesses fail.
  1. Poor Location
    If your business is a retail, food or other walk-in or drive-by type operation then the old saying “location, location, location” is very true. Choosing the wrong location for your business can be a fatal mistake regardless of all other positive factors.
  1. Poor Marketing and Advertising
    Even to the experts advertising and marketing often comes with a bit of guesswork. For a small business, especially one in its start-up phase wrong guesses in advertising and marketing can be costly and ultimately force a business into failure.