The current economic outlook for American businesses looks promising. Unemployment is low, GDP is up and the stock market is healthy. Despite all this success, however, small business failure rates remain the same. This is a troubling statistic considering more than half of them won’t survive past five years.
So, how is it that the economy is booming, yet small business failure is flat? It’s because macroeconomic successes have nothing to do with the day-to-day operations of small companies. There are many reasons small businesses fail, such as cash flow, inability to execute, competition and even low product interest. When you are running a small business, every speed bump feels like a mountain. Hit too many speed bumps at the same time and it can cause cascading problems that are difficult to overcome.
Without a doubt, the data is clear on one thing: 82% of the small businesses that failed did so because of cash flow problems. It’s the number one small business killer. When business consultants analyze these failures, they tend to focus on high-level problems such as poor go-to-market strategies, leadership issues or even poor financial planning as the primary cause of failure. While those reasons can all contribute to cash flow problems, there may be a practical problem that is influencing underperformance even more. That problem stems from a poor technology toolset.
If you have ever started a business, you know how captivating it is to envision the product, how you are going to market it and how you are going to succeed year over year. It’s exciting to obsess over product details, catchy brand slogans and the layout of the office. However, as they said in the first Star Wars movie, “It’s a trap!”
Running a small business is about the grind, the day-to-day operations and finding a way to keep your head above water. Like the shock of cold water in the ice-bucket challenge, reality can hit you hard and all of those hours picking paint colors for the office suddenly seem wasted. Small businesses inherently overlook the technology platforms that help them manage their day to day -- and that’s exactly how cash flow begins to erode.