Home topics finance finance-cash-flow Cashflow Starting Cashflow Reasons why small businesses fail Jessica Stanic December 18, 2009 Why small businesses fail and how to avoid their fate In tough economic times, small businesses are often the first to go under, and with the recent financial crisis, many have struggled to survive. While the worst is now well and truly behind us and the operators still standing are breathing a big sigh of relief and looking to the future, those that became victims of the crisis will be picking up the pieces and wondering where it all went wrong. There is a fine line between failure and success; one that small businesses have to tread very carefully. Here we look at the reasons why small businesses fail in the first couple of years of operation, and steps they can take to stop this from happening. Australia’s most deadliest business myth is that the majority of small businesses will fail in their first year, and the percentage of business failures has been greatly exaggerated over the years. Evidence suggests that first time operators have roughly a 50/50 chance of survival, and that will largely depend on how they manage the business. The more efficient and savvy they are, the lower the failure rate. According to Australian Bureau of Statistics, an estimated 42 percent of small businesses ‘exited’ between 2003 and 2007. When you look closely at the exits and how they got into that position in the first place, it becomes apparent