This document outlines common reasons why small businesses fail and steps owners can take to prevent failure and grow their business. It notes that over 50% of small businesses fail within the first year and 95% within five years, often due to a lack of planning, poor cash management, inadequate customer service, or owner burnout. The document recommends businesses create a detailed business plan that defines their mission and value proposition, organizational structure, products/services, target market, and financial projections to help guide their growth and prevent common pitfalls that lead to small business failure. It also encourages owners to seek advising support from resources like the Small Business Development Center.

1. How to Take Your Business
to the Next Level
Presented by Highline College SBDC
Hosted by BKM Management Company

2. AGENDA
• Why most small businesses fail
• Steps to Prevent it
• What to focus on first?
• Resources

3. Why do most small business fail?
According to the U.S. Small Business Administration, over 50% of
small businesses fail in the first year and 95% fail within the first five
years. The reasons can be many, but here are a few of the most
common:
1. Lack of planning
2. Poor Cash Management/Lack of Capital
3. Poor Customer Service
4. Lack of systems and processes
5. Owner burnout
6. Unable to communicate value
7. Unaware of surroundings (competitors, economic indicators, etc.)
8. Stopped Learning

4. 1. Lack of Planning
“If you fail to plan, you plan to fail” – Benjamin Franklin
Business Owners need 5 types of planning:
• WHY – Develop a mission and vision statement
• WHO – identify key positions and their responsibilities
• WHAT – Define your products and services and market them
• WHERE – What is your target market? Where will you sell?
• HOW – You need long and short term goals and a strategy

5. 2. Poor Cash Management – Lack of Capital
Many companies fail because they don’t know how to manage
their cash flow. The sales may be there, but is the money being
collected? Do you have a back-up plan if unexpected costs arise?
Small businesses also often don’t borrow enough to get started,
which results in them being in the red from the very beginning. It
is hard to dig yourself out. Friends and family may be forgiving,
but banks and lenders are not.

6. 3.Poor Customer Service –
It CAN happen to you!
We open for business…
We grow…
We get busy…
We hire employees…
We’re too busy to train them…
We have frustrated employees…
They take it out on the customer…

7. 4. Lack of Systems and Processes
Small business frequently start with just one
person. As they grow, more are brought on board,
but no one has taken the time to record exactly
how they do what they do.
This means that each person is in essence –
irreplaceable. If they get sick, or leave the business
is at a standstill.

8. 5. Owner Burnout
Even if this is your vision, you can’t do it all!
“The typical work-day for the entrepreneur is undefinable. It never
ends. Your brain is always on over-drive. Yes, you may not always be
in the office but your mind is forever racing with different thoughts
covering a myriad of issues: payroll, rent, new office space, customer
retention, hiring, firing and so much more.” – Jeff Shavitz
Entrepreneur Magazine

9. 6. Unable to Communicate Value
What is your “Unique Value Proposition”?
What makes you different – better, than your competitors?
If you haven’t defined this and communicated it to your
employees, your vendors, and your customers; you are
destined to fail. There are just too many companies out there
competing for your customers’ attention

10. 7. Unaware of Surroundings
This can encompass a variety of factors:
• Unaware of competition
• Not taking into account local economy
• Not knowing about changes in the supply chain
• Unaware of resources available
• Not knowing community concerns
• Lack of capital financing opportunities
Understanding how these factors can affect your business is
critical! Stay informed through network and involvement.

11. 8. The Owners Stopped Learning
Sometimes, failure comes unexpectedly – you got comfortable!
Today’s market is ever-changing. Innovation and disruptive
technology have transformed many industries. Think Kodak film.
It is imperative to stay on top of trends in your industry.

12. Steps to Prevent Small Business Failure
All of the sources listed previously can be avoided by simply having
a succinct Business Plan. It should include the following:
1. WHY –Create your Mission Statement and Value Proposition.
2. WHO –Create an Org Chart with detailed Job Descriptions
3. WHAT – Create a Product or Service listing/catalog/website
4. WHERE –Identify your customers through Market Research
5. HOW – Create financial projections and a marketing strategy.
Need help? Contact the SBDC for No-Cost Advising and quality
referrals to other resources.

13. Thank You!
Location: Highline CC – The Highline Outreach Center
Address: 23835 Pacific Highway South, Suite 102
City: Des Moines State: WA Zip Code: 98198
Telephone: (206) 592-4150
Fax: (206) 870-5929
Email: rshockley@highline.edu
Telephone: (206) 592-4153
Fax: (206) 870-5929
Email: jdye@highline.edu
Rich Shockley, CBA, CGBP Jennifer Dye, MBA, CBA

14. Sources Cited
• 10 Reasons Small Companies Fail
https://smallbiztrends.com/2016/07/small-companies-fail.html
• Ways to Take Your Small Business to the Next Level
https://www.thebalance.com/small-business-next-level-2951535
• Top 10 Reasons Small Businesses Fail - The New York Times
https://boss.blogs.nytimes.com/2011/01/05/top-10-reasons-small-businesses-fail/
• Five Reasons 8 Out Of 10 Businesses Fail - Forbes
https://www.forbes.com/sites/ericwagner/.../five-reasons-8-out-of-10-businesses-fail/
• What Causes Small Businesses to Fail? - SBA, management
skills ...
www.moyak.com/papers/small-business-failure.htm
• 6 Reasons Your Small Business Will Fail (And How to Avoid
Them ...
https://articles.bplans.com/6-reasons-your-small-business-will-fail-and-how-to-avoid-t...
• Why Small Businesses Fail: Top 7 Reasons for Startup Failure
https://www.businessknowhow.com/startup/business-failure.htm