Reporting on the Failure of Small Businesses may seem strange at first for a website the purports to help small business. My opinion is that as we can learn from others mistakes, well mistakes is too harsh. Often business failure can be due to other factors, often outside of the control of business owners. Circumstances, environment factors and timing all make a difference between success and failure. Even with the best due diligence and market analysis businesses still fail. So yes, learning from real life examples can help us alleviate at least some of the risks. The extract below is One example out of Five, I urge you to check out the other examples as well.

It has been another tough year for many small businesses. One in four, according to the National Federation of Independent Business, believes the biggest problem is weak sales. No matter what other challenges they face, said William Dunkelberg, the federation’s chief economist, “the key to everything is cash coming in the front door.”

We did everything right’

Just Moulding, based in Gaithersburg, Md., sold and installed decorative molding. It opened in 2004 and closed in April.

At its peak: Mark Rubin and Kevin Wales started with a single workshop that handled small jobs that larger installers did not want. In 2007 things were going so well they decided to sell franchises in the business and raised $700,000 from 21 investors. After Wales left the company in 2010, Rubin’s father-in-law, Richard Hayman, took over as president. Soon after, sales increased by 20 percent and the company became profitable.

What went wrong: The recession. The company, Hayman said, sold a product that people wanted but did not need: “It was crown molding, not a furnace or a roof.” And while the business had the high legal and accounting costs associated with selling franchises, it had sold only three by the end of 2009. Potential franchisees had trouble raising the $100,000 to $250,000 needed to get started.

Looking back: “We did everything right,” said Hayman, who sank $470,000 into the company. “We hired the best people and had a great product. We could not overcome the bad economy.”

Going into business is not as easy as most people think, there is no guaranteed big payoff, sometimes no silver lining. There are huge risks involved both financially & emotionally so it is important to report on the failures as well as the successes to give a balanced view for those considering going into self employment. Do you have any advice or warnings?

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