Why do many small business fail in the start phase?

Most of the small business fail before those start running. It may take months for a small business to earn money. Many business can not survive so long.

Cash flow is crucial for a small business:

I used to be an owner of small business. Later on, I have worked as business consultant. I have seen many business grow. I, also, have seen many business collapse.

I can tell you that the first one year is very critical for a newly started business. If a business collapses, it does within months to a year. If a business survives more than a year, that would more likely sustain. The start phase is very critical for a small business.

The typical reason of failures is the shortage of cash. Many startup entrepreneurs have wrong assessment of required capital and make establishment budget. Establishment costs don’t only include machinery and inventory, but also the operating cost until the business really run. They calculate the expenses to start a business but forget to calculate the operational costs for some months.

A business can not earn money from the first day. It may take months before money starts coming. Until then it costs money to keep the business alive…