Top 5 Reasons Why Small Businesses Fail

Starting a small business is way to living your American Dream. But the market place is often unforgiving. Research shows that less than 5 out of 10 small businesses survive beyond first 5 years. Any budding entrepreneur planning to invest his time and savings into a new venture would not want to be a part of this sobering statistic.
Top 5 Reasons Why Small Businesses Fail
Though there are very little authentic research available, Dun & Bradstreet did come up with a oft quoted research report more than a decade ago which said 88.7% of businesses fail due to management mistakes. Well, that doesn’t really help.

Read on to find out our take on the pitfalls of small businesses due to management mistakes and how to avoid them.

1. No Viable Market

You have this great idea for service or product which you think will change the industry, but have you stopped to think if there are customers willing to pay for it? Build it and they will come school of thought has only let to demise of many small business owners.

Answer this question before plunge into any new business – Why should a customer buy from you and not from a corporate giant or others who have been the business for years? Is it because you offer much needed personalized service or customized solutions or even shorter turnaround time or after sales service. What is it?

Check out this podcast by Steve Blank, a professor in Stanford. He mentions that about 90% of the start ups die because they can’t find the market. So he says, go find out if there’s someone who wants your product or service. Do know what your value proposition is?

As Peter McLean writes in his article Small Business Plan – What is your Value Proposition? – Value proposition is only discovered through depth of thought and rigorous analysis of the market place, competition and existing practices. It involves listening to what the customers are saying and understanding their needs.

Make sure your business offers something that customers would value.

2. Poor Capital Structure and Cash Flow Crunch

It is fairly common for business owners to take up too much debt or underestimate capital required to reach cash flow breakeven, causing many promising ventures to shut down prematurely. You need to be conservative with your financial projections and be sure to have adequate funds (or personal savings) to cover all the sunk costs, till your business becomes cash flow positive. Small business cash flow crisis –Pyschology and not economics is to blame, by Chaitanya Sagar, CEO of, tells you how to stay out of cash crunch.

3. Lack of Marketing Expertise

Your customers won’t buy from you if they don’t know you are around. You need to market yourself. And do not make the mistake of treating marketing as an unnecessary expense!

Find effective ways to market yourself through advertising, direct marketing, trade shows and exhibitions. Set up your website and market yourself through internet media such as blogs, forums, email groups and even search engine marketing.

The results are never instant and you need to find the optimum mix that works for your industry. Hire a consultant if you do not have the expertise.

4. Poor Management

Poor management ranks high on what not to do list of business owner. If you lack current and relevant in formation in finance, purchase, selling, production, hiring and managing employees, get help!

When you reach a critical level (about 1 million to 5 million dollars), be sure to put proper management structure in place that will make the work flow

and information flow optimal without your business loosing its dynamism. Also this is the time when you hire suitable managers.

5. Out of touch with customers

Most small businesses are able to have a personal relationship with customers. This is one advantage that huge corporations do not have. You need to focus on good quality products and services and aim on high customer satisfaction levels.

Use customer feedback as free business advice! Ask you customers for feedback and suggestions, evaluate them and incorporate into your business. This mechanism would help you gauge changes in customer tastes, preferences, price sensitivity. Also they are the best source of information of your competitor activities.

Life as a small business owner can be exciting and rewarding, if everything goes as per the plan. You have the advantage of being forewarned about the pitfalls of being in a small business. So go for it!

Top 5 Reasons Why Small Businesses Fail

About the Author: Shaila Rao is a guest contributor at which helps small businesses outsource services like writing, software, graphic design, virtual assistance, business consulting and research. Shaila blogs at p2w2 blog (RSS).

Picture credits: yanec, danesparza

Project Management on p2w2; Now, better than before!

Handling your projects just got a whole lot easier! The file management feature on p2w2 lets you save your work files for a project at one secure location so you and your client always have access to them. This makes working through P2W2 much more efficient and faster.

These files are visible only to parties involved in the project, the client and the professional. Confidentiality is assured!

Each project has a dedicated file space set aside for it, so all the files for a project are in one location without cluttering your private workspace.

Project Management on P2W2; Now, better than before!

Here’s why we think using the file section is a great idea:

For starters, all the relevant documents you need for your p2w2 project are placed in one secure location. They will be shared only between the professional and the client, so confidentiality is maintained. You can revise your documents too and store the different versions in this file section. If you think that you might forget which files contain what, we’ve also provided you with the means to append small descriptions and notes alongside each file so that it is convenient for reference.

Maintaining a log of all such activity and revisions makes the work more accountable and efficient. You can compare different versions of a file. You no longer need to hunt through your system for the files and in the event of a system crash; you can still find all documents stored online. This makes you a more reliable person to work with since you can work from almost anywhere while still maintaining your travel schedule.

Only your latest version for any file is visible, thus keeping your workspace clutter-free. Also, for security and privacy reasons, if you delete a file, all versions of the file are deleted. So, in case you want to revert to an older version and discard the rest of the versions, save it under a different file name first.

So many files, so little worries:

You can manage large projects easily since different file formats can be uploaded. For example, if you are designing a web-page, then you can upload images, media, content files and HTML/CSS or other related files with descriptions of

each to guide the project development.

You can mark a file as a ‘deliverable’, i.e. one which can be used for the project. Once all the revisions are made for a file, you can indicate that it’s a deliverable by choosing the option while uploading it.

Finally, getting to do it yourself:

Lets start with getting familiarized with the files section in your projects:

1. Start by first logging into P2W2.
2. Open your projects page and click on the name of any one of your projects.
3. You will see a small menu with items like, ‘Project Home page’, ‘Files’, ‘To-Do,’ etc. present. Click on ‘Files’.
4. You will see an ‘Upload’ button, and two sections titled: ‘Deliverables’ and ‘Other Files’


5. Click on the ‘Upload’ button.
6. A small window has opened on the page, asking you to browse for the file on your system with a few other fields namely: ‘description’ (for adding small notes about a file), ‘milestone'(in case you want to link files to a milestone date) and a checkbox which lets you upload the file as a deliverable one as required.
7. After you select the file, add a short description of your choice so that you know what the file contains. Select a milestone as per a decided date if applicable
8. This is what you should see before uploading.


9. Now, after you click on the upload button, your file will be visible under the ‘Other Files’ Section or the ‘Deliverables’ Section depending on your selection.

Click on the link next to your file name which says ‘upload a new version’ and a small window will open again like before. This time you can see the current version of the file displayed. Clicking on the files will let you view them in the browser.

Uploading a new version of the file.

p2w2 lets you store up to 5 versions for a file on our servers.


To delete all versions of your file, simply click on the trash can icon next to the file. In case you need to maintain just one final version, upload it on a new file name and delete all versions of the old one.

Try this feature out and let us know what more you would like to see in it to help you use it better. We hope you enjoy using the Files feature and the other collaboration tools we have on p2w2.

About the author: Amit Mullerpattan is VP (Product) at which helps small businesses outsource services like writing, software, graphic design, virtual assistance, business consulting and research. Amit blogs at p2w2 blog (RSS) and tweets at

Image credits (top): M Wichary

SpyFu: Useful But Can Be Better

I had written about SpyFu before in one of the very popular posts on this blog: p2w2-SBL: 5 Good (Marketing, HR and Other) Websites for a Small Business. I had a chance use SpyFu recently. I wanted to check how useful it is to design a Google Ads campaign.

If you don’t know what SpyFu is, here’s an introduction from SpyFu. (I couldn’t find “About us” in their website. I got this in their “Manual” after a long search)

SpyFu is a website that allows you to “Spy” on your Google adwords competitors.  We run over 2 SpyFumillion terms through Google every month and index the search results and advertisements that come back.  In addition, we do pricing lookups on all the terms we run.  A bunch of number crunching and roll ups and we can tell you what a domain or company is doing on Google.  The final ingredient is some category and industry mapping of those domains and companies and you have SpyFu.

Here’s a better one from KeywordResearching:

SpyFu is an online competitive intelligence application that allows you to browse competitors’ PPC keywords, daily budget, bid prices, clicks/day, and other interesting PPC facts & figures.

As on Jan 28, 2009, SpyFu claims that it’s currently indexing 508 million results on 2.1 million keywords across 9.6 million domains.

Features I Liked

1. You can check out competitor’s ads that get them most clicks.

2. You can view landing pages of competition (or for that matter, other companies) and learn from their landing page strategies.

3. You can check out data like competition’s estimated ad budget,

4. I like their 3 day trial offer that costs $18.95. It seems like a low risk option.

What I Did Not Like

1. The biggest issue I have is that they provide you with a dump of data. It’s very difficult to mine the data to get insights. The only way to figure out which is working better is to sort by clicks. This by itself is not useful. If you pick up competition’s keywords and out bid them, it’s going to prove expensive to you.  That’s not how small businesses work! I think they would like to get more bang for the buck and not want to out bid competition in advertising!

2. I am not sure how accurate their data is. To quote KeywordResearching,

I compared some of the competitive data that SpyFu provides with my actual campaign statistics, and noticed that SpyFu is not really accurate. For example, one of my clients spends about $300/day on Adwords, and SpyFu says the daily budget is $3.32. I performed another search for a different domain and also noticed inaccuracies with the reporting.

What I Would Like to See in SpyFu

Very few small businesses are just looking out to publish content around most expensive keywords. In my case, that’s the least priority. To me, offering valuable content to my readers is of higher priority. But I would like to sell my services and I am interested to know the following:

1. The best performing ads for a set of keywords so you can understand how to increase your click through rate (i.e. how many clicks per 100 impressions of the ad).

2. The least expensive keywords on a topic so I can bid for them.

3. I am not sure if it’s possible to do it, but I would like to know which ads have higher conversion (how many finally bought)!

These are what I am interested in first because higher click through rate shows that the ad copy got your prospects interested and second because it affects ad position. In my opinion, many small businesses, who have their products and services to sell, need similar information.


Here’s a training video that I found interesting. It oversells SpyFu but tells you everything about SpyFu in a short time.

Do you know any other keyword research tools that can help design better ads or find less expensive keywords?

About the author: Chaitanya Sagar is the Co-Founder and

CEO of p2w2, which helps small businesses outsource services like writing, software, graphic design, virtual assistance, business consulting and research. He is fascinated by entrepreneurship and the difference technology can make in people’s lives. Chaitanya blogs at p2w2 blog (RSS) and tweets at