How a Small Business Can Go Broke Fast
It can be easy for your small business to go broke fast if you are not prepared to run the business successfully. Small businesses just starting out can’t take the same gambles that bigger or more established businesses can take. There are four common critical mistakes you could make that could result in your small business going broke quickly; anything from getting into debt from student loans, to not insuring your employees.
Start a Business Without Being Prepared
Starting a new business is not something you want to do on a whim. You will want to take the time to form a solid business plan and have some money in the bank before you launch it. It is important to engage in market research within the industry your business falls under. If you don’t have a good sense of what the market in your industry looks like, it is likely your business will fail.
Sienese Businessman by THRILLHO, on Flickr. This work is licensed under a Creative Commons Attribution 3.0 Unported License.
Don’t Purchase General Liability Insurance Beforehand
If you do not have general liability insurance when you launch your new business, you are putting yourself at risk for failure. This is especially true if you have already hired employees for your business, or are planning to shortly after opening. General liability insurance protects your company in the event that a customer or employee is injured or falls ill as a result of something that happened to them while on the premises of your business. It also covers the cost of any court fees you might encounter if a customer or employee sues you. If something happens while your business is still new and you end up in court over it, you are likely to see your business go broke before you even have the chance to fix the problem.
Use Your New Business to Purchase Luxury Items
So you started your new business and it is going great and as a result, you decide to treat yourself to a new Ferrari. Chances are, the money you spend on that Ferrari will take enough money away from your business that it folds because you can’t afford to keep up with expenses.
Lie to Your Investors
In the event you seek out an investor to help you fund the launch of your business, lying to them can backfire on you. If they find out you lied and they pull the funding they were going to give you, it is likely that your business will go broke before it has a chance to profit.
