One of the Top 10 Reasons Small Businesses Fail

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq., owner of Ask The Business Lawyer, is an award-winning business attorney, speaker, and Entrepreneur Magazine online contributor. She saves consulting and professional services companies time, money, and aggravation by serving as their outsourced legal counsel.

Posted on October 18, 2017 in Planning & Advisors

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According to Dawn Fotopulos, president of BestSmallBizHelp.com, one of the top 10 reasons small businesses fail is that they overspend on fixed assets. Do you really need that state-of-the-art computer system right out of the gate? Will your customers care whether your desk is make of solid oak or pressed particleboard? Will they even see it?

Overspending on fixed assets can raise other problems–legal ones–for small businesses, too, especially if they buy on credit (a likely occurrence if cash isn’t exactly flowing in). Entrepreneurs run the risk of maxing out credit lines, reneging on equipment leasing agreements and breaching other contracts if they’ve not conserved their cash carefully.  Then, when the lawsuit comes, they have no funds to defend it. From there, it’s a hop, skip and a jump to bankruptcy court. And if your agreements contained any form of personal guaranty, your personal assets are in the mix, too.

You can easily avoid business failure–and overspending–by making sure you’ve run your numbers with “defendable” projections (that is, projections that you haven’t pulled out of thin air or from a Ouija board). It’s an area where ignorance is definitely not bliss. You may not have been trained as an accountant, but if you’re going to run a business, you have to have a passing understanding of the story the numbers are telling you. Check out BestSmallBizHelp’s powerful library of accounting basics and other training videos to get up to speed in plain English.

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