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Sure path to business failure
It's hard to start a business, but yours can crumble quickly without enough cash and market sense.
Focus on careers

5 ways to crash your small business

Millions of workers dream of starting their own business, but the odds of being successful are daunting enough to keep most hopefuls on the sidelines.

For those who do go into business for themselves, without a background in business, it can be a steep learning curve.

But hope springs eternal. According to the Small Business Administration, or SBA, 637,100 small businesses with employees were opened in 2007. Based on its research, the SBA estimates that two-thirds of new establishments will survive two years; only 44 percent will survive four years. The survival rate plummets to 31 percent when the life of the business reaches seven years.

Although small businesses can crash and burn for many reasons, avoiding some of these common mistakes can help your small business beat the odds.

How to run your business into the ground
Skip the market research
Business owners need to know the who, where and why of their business before they can sell anything. But not all business owners take the time to find out if they even have a market before jumping in, and failing to research your market can be disastrous for new companies.

Wendy Vinson, president of E-Myth Worldwide, recalls one client who, being a musician, wanted to open a music store, selling instruments and teaching lessons in the back. He investigated a couple of different towns and found out how many people went to music schools and where they really got their supplies.

"This guy was great," Vinson says.

He researched where he would find the most people interested in music, instruments and lessons.

"He did a competitive analysis between the cities, and the one with the most opportunity was the one he chose," Vinson says. "I can tell you that the majority of start-ups do not do that."

In many instances, would-be business owners make decisions based on their lifestyle, such as opening on a corner near their children's school or close to home.

"We would say, do market research, validate that your business is needed and model your service to what is needed," Vinson says.

"Understand the competitors and how you can make (your business) stand out. What is different about yours -- how you wrap your product, pricing. Some people will just throw things out randomly -- even how they name their business," she says.

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-- Posted: March 30, 2008
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