What is the number one reason why new businesses fail?
Answer by Drew Steig – Quoras Own Start Up & Small Business Guru
Answer originally posted on Quora.Com
I have not ever owned a business that has failed. I will tell you how the first business I was directly controlling failed.
I moved to Texas specifically to help an old friend start a business, let’s call her Tina. Tina was very successful in IT and wanted to run a small business as well, and asked for my help. One thing led to another and after helping her select a business, I was offered a job running it for her.
So I gave her a list of things that needed to be done in preparation to me leaving my job and moving halfway across the country for this. She needed to get a small business loan, and get all the paperwork started. I also needed a budget for a salesperson, as sales is not my strong suit. She agreed. She told me its done lets get this going.
So I came, and got started. Once I arrived I found out her brother who had never had a job, and had a degree in general studies, lets call him kevin, was going to be working with me. Oh and Kevin can’t do sales, and that leaves no budget for a sales person right now. I also found out she never got a business loan, she took out 15 credit cards. With 10k limits. I almost threw up.on top of all that she didn’t keep a reserve of cash as requested. Instead payroll was paid with cash advances on credit cards. Then she started another business, brining in another brother, lets say tony, and put me in charge of that one too.
Despite of all this I got clients and built relationships, and in 3.5 months we finally hit break even. Due to my hard work, we were on our way to success. Immediately after which I was laid off, because Kevin wanted my job.
Last I heard Kevin lost all their clients in 2 weeks, and tina filed for bankruptcy.
Moral of the story, don’t fire the only guy who knows what he is doing.