The Reason Small Businesses Go Broke Before They Start

You can have a brilliant idea for a new product or service, write the perfect business plan, establish an exceptional line of credit, find the perfect location for your startup business, set up secure supply lines, hire the top employees in the industry, and still be bankrupt before you deposit your first check or open your business bank account.

You might be wondering how I know this and you are right to question. I grew up in the family business in a small town where the statistical odds of success are much harder than in a larger marketplace.

My college courses in marketing, the most important cornerstone of any entrepreneurship business, provided a third of my former students to millionaire status. The success of every small business begins and ends with this simple principle I’m about to share with you.

This is what happens when new entrepreneurs follow the financial industry script written in text books and talked about in blogs and videos by people who have never made payroll or faced bankruptcy, I have. It’s all over the media, in the headlines, talked about by titled self-experts who lure beginning young adults who want their own business, only resulting in failure.

More than likely, it will be years later the small business owner realizes what they did at the beginning has put them at a disadvantage or eventually out-of-business. There is a long history when done right, you will have customers the first day and sales.

It makes no difference whether you are starting a business or buying a house. Others, federal reserve – banks – financial institutions – private equity, don’t hold all the cards. You have a choice of choosing the debt market or your primary market of customers.

You can be a debtor or investor. The coin flips both ways.

As a non-debtor you can avoid the credit market seize of the debt market. As an investor, you own your lot, building and inventory of your business and its operations.

The killer first and last nail in the coffin is paying rent making the landlord rich by contributing, paying a portion or all of their mortgage payment, property taxes, business insurance and all other ancillary expenses first before you profit. Own, don’t rent in any small business.

That’s why they call it small, a small business. You are better off to walk-away and move to an area where you can purchase the property to start removing all overhead, than paying rent out of your sales.

Your thinking location, location, location. This is the imaginary seduction that leads many novice entrepreneurs to ruin.

It’s no fun working for a landlord rather than yourself. I taught this principle for many years, but with the busting overhead allusion that kills your business before you even open the doors.

I’ve seen this happen a hundred times. What I’m now about to share with you is Golden.

When you own free-and-clear title to your business property, building, inventory, and have been setting aside 20%-50% of your net profit at the end of each year in a simple escrow account, no large corporation can buy you out or put you out of business.

Cavet Emptor, ignore this simple first action as an entrepreneur at your own peril. Whether it’s the allure of becoming rich or a big business, renting in a big mall or anywhere else with high rent will eventually eat your lunch.

Never rent. Never have a partner. Never be without extra cash. Pay back all of any startup capital within 5 years.

A small business can make you wealthy, prosperous and independent.

Rent, instead of owning, is the number one reason all small businesses go broke before they start.

Caveat
This article is based upon extensive reading, research and experience.

The thoughts are the sole opinion of the author and nonadvisory and nonpolitical. The written content is based on experience, opinions, and ideas and research of the author. The author is not engaged in rendering advice. Quotation of passages for purposes of academic research, academic papers, criticism, education, review, and teaching are permitted with proper acknowledgment of the author. All rights reserved.

Source …
My Little Business (Grooms 2023)
Keeping It In The Family (Grooms 2024)
How to Start a Business in 20 Days (Grooms 2019)

The Future AI Artificial-Intelligence Society will be published in my coming book … “Rule of 5”.