There are over 30 million small businesses in the U.S. today, with 4 to 5 million new applications submitted each year. But even with a strong passion for a new business venture and the best of intentions and business plans, the success rate for new businesses is alarmingly low. About 20% of new businesses fail after only two years, and almost 50% fail after five.
There are a lot of underlying reasons new businesses struggle in their first few years, and any combination of factors can slim down the chances for success considerably. The most commonly-cited reasons or contributors to business failure involve:
bad or ill-timed products
flawed business model
poor cash flow management
An unqualified team, insufficient market research, and a poorly-chosen location can also be factors that lower the odds for a new business. A wide array of online services have emerged to help developing businesses thrive; new business owners can find services to help with just about any aspect that challenges them. While online tech tools cannot solve every problem, they create instant and affordable access to resources new businesses need—resources that used to be inaccessible to small and micro businesses on small (or micro) budgets.
Cloud-based financial software products for businesses have become ubiquitous and are no longer reserved for only large corporate ventures. Accounting and bookkeeping services can assist new, budding businesses with tracking expenses, sending invoices, issuing payments, running reports, and preparing taxes. Some can also issue paychecks and integrate with HR management software for a completely streamlined system. While online tools cannot fix every issue, they can help new business owners with two of the biggest challenges new businesses face: lack of money and lack of resources.
Poor financial management is the biggest reason small businesses fail; financial problems can include insufficient start-up costs, inaccurate budgeting, underestimating the costs of inventory and supplies, and poor cash flow management. Most small business entrepreneurs are not bookkeeping specialists and do not have the time or expertise to devote to financial management tasks. Cloud-based bookkeeping and accounting tools can help out here by offering low-cost, low-commitment, easy-to-use platforms that can do everything from sending out invoices, to tracking expenses, to reconciling accounts, to issuing payments, to running reports. Programs that integrate with one another mean less time spent on data entry and far fewer errors.
Small businesses are a major source of innovation and job creation. Small businesses employ millions of people and provide services in virtually every type of industry. Many small businesses, however, do not start out as job creators; about 80% of small businesses operate as solo ventures with no employees. That means that the success of the business—and a very heavy amount of work—rests entirely on one innovative and dedicated individual. Expanding a business too hastily is a costly mistake and one cause for business failure; at the same time, “burnout” from doing everything alone also threatens small business operators. In fact, burnout has been cited as a significant contributor to early small business failure: one person can do it all only for so long.
Efficient time management is key to keeping the energy levels up so that enough attention is directed where it needs to be. In the early years, while the business is still growing, it is often helpful to take on outside resources and tools that fill in expertise gaps and reduce the routine clerical and administrative burden carried by one beleaguered solopreneur. Cloud-based tools for small businesses give busy entrepreneurs access to some of the resources that used to be too pricey or out of reach for a young venture. Until a new business is ready to take on full-time hires, entrepreneurs may choose affordable outsourcing options to alleviate some of the responsibilities surrounding predictable management tasks: customer service, billing, accounting, appointment scheduling, and administrative organizing.
Cloud-based tools make outsourcing possible for a lot of small business budgets because their 24/7 online accessibility makes them ideal for remote work. Virtual bookkeepers, assistants, and other part-time freelancers who contribute an outside expertise to a new business can have immediate and mobile access to documents and accounts from wherever they happen to work. Their contributions and updates are made in real time, so that there is no delay in data sharing. Cloud-based tools also come with their own in-house IT services so that site maintenance, updating, backups, and security are not the worries of the clients who depend on them.