Why Do Most Businesses Not Make It?

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You have certainly read or heard that “90% of all businesses fail within the first 5-years”. This is a common statistic that we all have heard, and I am not here to dispute it. But what I am here to discuss is the reason why businesses fail. The reason why most businesses do not make it is because they run out of money. You will hear stories of failed business owners focusing on the expenses as the reason they failed. Rent was too much. Labor was too much. Quality was bad. I made bad hires. Inventory cost too much. Yes, all these things can be devastating to a business, but with enough revenue coming in the door all these problems can be overcome. What you rarely hear failed business owners say is “I didn’t have enough customers”.

We can trace the root cause of most (if not all) business failures to the fact that they did not have enough customers, which resulted in not having enough revenue to pay the bills. Expensive rent, expensive labor, and even bad quality and bad hires can be overcome with enough revenue. And, yes, expensive inventory can be overcome with enough revenue. And as we know, revenue comes from one thing and one thing only: customers.

Before you start a business, make sure that you fully investigate the prospects for a customer base. Instead of getting caught up in a fancy name, location, or even a product make sure your primary focus is on a customer base. If you do not have customers waiting to pay the bills, then you will most certainly face a long uphill battle.

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