Why do so many small businesses fail?

According to the Small Business Administration, two-thirds of new businesses survive for around two years, and only 44 percent make it to four years. Why some businesses fail and why some succeed is often up for discussion, although there are some common mistakes that can sink a business in no time.

Give your new business venture a fighting chance by taking care to avoid these fatal errors:

Rushing into things you can't afford. Wanting to be the first to market with a new product, taking on added overhead, and the need to demonstrate revenue growth to anxious investors can all induce businesses to overextend themselves financially. Rather than head down this path, start with realistic goals, plan your sales channels within your budget (i.e don't spend money you haven't got on a web site and eCommerce facility and then rely on it to bring in revenue from day one) and allow yourself to grow as needs dictate. Let your revenue, not pie-in-the-sky projections, dictate your business decisions in terms of growth and strategy.

Poor capital structure. Look at the businesses that fail and you'll find that many of them took on too much debt. Learn to pay strict attention to your finances and keep careful records of all money coming in and going out. Even if everything's coming up roses today, trouble can still be right around the corner.

Poor Products in a flooded market. Trying to sell a sub standard product in a flooded market is a recipe for disaster. Make sure that your product works, and that it can compete in a volatile market. Remember, when selling on the internet that product appearance is everything. If your product looks better than its competition and you can easily distinguish that it will be an excellent investment for its intended use, then you are already on to a winner.

Lack of reserve funds. Failing to prepare for volatile markets and uncontrollable costs like energy-rate increases, materials, labor, natural disasters, and the like is another top reason many businesses fail. Make sure you protect your investment and keep enough reserve cash to carry you through market downtrends and seasonal slowness.

Bad business location. Don't let a cheap lease tempt you into opening your doors in the wrong neighborhood if your gut is telling you it's not right. Key factors to consider include competition (how many other similar businesses are located nearby?) and accessibility (is the area well served by freeways, public transportation, and foot traffic?).

Poor execution and internal controls. Poor customer service, accounting controls, and overall employee incompetence can all combine to bring down the ship. Make sure you and your employees place a premium on customer service to generate repeat business, establish protocols for how tasks should be accomplished, and remain continually in the know on all things accounting.

An inadequate business plan. Your business plan is your blueprint for success. A well-thought-out business plan forces you to think about the future and the challenges you'll face. It also forces you to consider your financial needs, your marketing and management plans, your competition, and your overall strategy for coming out on top.

Failure to change with the times. The only constant in business is change. Once mighty behemoths fall to earth while unknown upstarts rise to prominence. The ability to recognize opportunities and be flexible enough to adapt to changing times is a key ingredient to surviving and even prospering in the toughest business climate. Therefore, learn how to wear multiple hats and to generate new interests and areas of expertise.

Ineffective marketing and self-promotion. Customers can't walk through your front door if they don't know you're there. Learn how to cost-effectively advertise and promote your business through such tried-and-true methods as direct mail, ads in local newspapers, Search Engine Optimisation for targetted marketing, Web sites, blogs, even by sponsoring a local little league team. The number of advertising and promotional ideas that exist is only limited by your own creativity. Heavily relying on one form of marketing is asking trouble from the start.

Underestimating the competition. Consumer loyalty doesn't just happen; you have to earn it. If you don't take care of your customers, your competition will. Watch your competition as closely as you do your own employees.