Small Business Failure – Reason: Fixed Cost

I have decided to write a little mini series on why small business and personal businesses, like contractors, freelancer, self-employed, sole-trader and virtual assistants, fail and how to find out if your small business is in danger, too.

In this first part, I would like to talk about fixed costs in small business. To perform a basic small business fixed cost health check, ask yourself the following questions:

  • Do I know where all the money is going every month? You should know where all your money is going at all times – if you don not know, it is important that you find out.
  • How comfortable am I with the current level of costs? Are you able to generate reserves in your small business, or is your business just making ends meet.
  • Are large parts of the costs for non-core business tasks and do I get value for my money? No matter how well your business is doing, you should never waste money – so if you can outsource do it, it will make you small business more focused and far more resilient and efficient.
  • Do I have a cash-flow forecast for my business? Having no cash-flow plan is like driving with your eyes closed – cash-flow planning is easy, and you will have a better feeling about your small business.
  • Are there any spending issues with business partners or colleagues? Are other people spending your money (?) and you can not control them – deal with it, sort it or get rid of them even if they are partners in the business, find a way or get help.
  • Am I in control of my spending or have I abdicated this function to someone else? Even if you have staff – outsourced of employed – doing your bookkeeping and organize the payments for you, you need to make the decisions of when your suppliers get paid, so you can control your cash-flow.

There are many more questions you could ask yourself, here I just wanted to get you going. If you have any more issues or are uncomfortable with any of your costs and answers to the above questions, then you should get some professional advice.

Running out of money is the reason most small business and start-up business, like SOHO-, SME, SMB-, Micro-, Lifestyle-, Home-, DIY-, Hobby-, Boomer-, Professional-, Personal businesses, fail – not controlling your fixed costs is one of the main reasons for this.

You can see other reasons for small business and personal business, like contractors, freelancer, self-employed, sole-trader and virtual assistants failures in my Health Check Category, if you can add to this list please do so, I would welcome your comments.

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