Why Startup Businesses Failed and Went Bankrupt


Building your own business often looks very simple and easy. But the success of new business is also still vulnerable and often failed on early stages.

Small businesses grow and disappear like mushrooms, according to The U.S. Small Business Administration (SBA) over 50% of small businesses fail in the first five years. Small businesses that still exist are the result of natural selection process because they have successfully applied the correct business principles. If you are trying to establish small businesses learn from the failures of previous small business people. Here are the factors why many small businesses fail and go bankrupt.

1. Lack of business literacy

Often the experience of entrepreneurs is also less because of new businesses is often done because of the high entrepreneurial ego ambition without preparation and planning of a mature business.

2. Lack of capital

Capital is not a major factor but important. New business in general will require a lot of funds prior to the sale of products converted into cash. Therefore a new business should be able to survive for long periods of time. Thus, this will require funds that are not small.

3. Poor business management

Planning must be made with a good business. Business objectives must be able to give an idea how big the sales goal will be achieved so as to prepare for how large inventories of raw materials and finished goods as well as preparation of a sufficient budget to support business operations, including marketing strategy in the face of competition.

4. High Competition

Entering the competition is high will increase the risk of business failure due to competitors’ market has been very understanding and very efficient in cost. Meanwhile, new players will learn new market characteristics and minimal budget.

5. Human resource management

At the beginning of establishment, employee salaries will suck big budgets. Therefore recruitment process to get qualified employees is a must. Achieving good proportion of personnel is not easy, when hiring over employees would increase spending or if too few employees will result in a less ideal of workload.

6. Fails in marketing

Marketing strategies are less successful because lack understanding of market characteristics and in-depth product. Marketing is the heart of a business no matter how well a product if you do not know how to sell well it will be difficult to get a higher sales.