While there may be some debate as to the frequency and length of time it takes, the fact is that many new businesses fail.  There are a variety of reasons for this and even well-established companies struggle to stay relevant.  According to an article in Analytics Magazine, “Of the original Standard and Poor’s (S&P) 500 List created in 1957, just 74, or only 15 percent are on the list today.”  Furthermore of the 74 that remain, only 12 have outperformed the S&P index average. 

So why do new businesses have such a high risk of failure?  Experts point to the fact that many new companies do not start out with a solid business plan.  Before turning an idea into a business, a considerable amount of research needs to be done.  The data should include information on the product’s target audience and current market demand as well as the projected potential for growth in the future.  Additionally an efficient delivery system must be developed in the early planning stage that gets the product easily into the hands of the consumer. 

 

Upfront there needs to be an honest evaluation of the kind of competition the business will face and a realistic assessment of start-up costs along with any legal requirements that must be met.  To save money, future business owners should determine if equipment can best be purchased through liquidation sales, at auction, or leased.  Also most new companies require technology so remember to include that into the start-up costs.

 

Once the business is started, be aware of overreaching by expanding too early or too large and always have a cash reserve on hand in the event of an emergency.  Keep operational cost low and do not make the mistake of paying out more than you can afford on rent and labor.  Lastly, keep in mind that some types of businesses do have an even higher rate of failure such as independently owned restaurants or tech companies.  

* http://www.analytics-magazine.org/may-june-2012/577

* http://www.moneycrashers.com/reasons-business-failing-companies/

Rabin Worldwide is an international company that specializes in creating liquidity for complex manufacturing facilities with idle or marginally productive assets.  Rabin’s operations include selling entire plants, multiple plant locations, or surplus individual items by auction or liquidation and much more. Past auctions include names such as Hostess, Braniff Airlines, and the Railway Express Agency.  Please contact us to discover how we may assist with your asset liquidation process.