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Common Financial Factors that Make Entrepreneurs Fail

It is a fact that for any business to thrive, there has to be a very good finance structure to properly cater for the needs of the business. The absence of a good financial structure puts the health of a business at risk. Hence, although most entrepreneurs have very great ideas and tenets with the capacity to drive their business forward, a bit more than 50 percent of small businesses still fail in the first four years. A huge majority of these failures can be attributed to the financial elements that have been neglected by these entrepreneurs. Some of them are outlined in this article


Quite a lot of entrepreneurs lack practicality about their finances. Yes a lot of entrepreneurs live the good life, go on luxurious vacations and spend a lot of money; its nice but it should be understood that the word “entrepreneur” doesn’t just attract all all those good things. As a matter of fact, the reason why anybody can go on an expensive vacation is because such an individual has the money to pay for the expenses. In essence, an entrepreneur should know how much he/she has and should make plans based on that. Lack of practicality with finances is a financial element neglected by entrepreneurs and is hence responsible for most failures.


The cash flow of the business is another factor often forgotten. For instance, a business might have high enough overhead costs and salaries but have issues getting the customers to pay their invoices on time thus altering the cash flow. When this is persistent it tends to hurt the business. It is very important for an entrepreneur to prioritize the measurement and ongoing analysis of cash flow in the business, regardless of other financial standings as it can ruin the business if neglected.


In situations where the entrepreneur is unable to distinguish between the business’ funds and personal funds, failure is sometimes inevitable as it is then very difficult to ascertain the quality of health of the business. When you can tell what stage the business is at, then you don’t have a clear picture of what direction it is headed. Sooner rather than later, the business might fail and you might be caught unawares.

Just as ignorance is not an excuse on the angle of law, it is very important to be aware of what position your business is in financially so that you can make decisions that fits your status thus culminating in steady growth

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