Q: In your experience as a lender, what have you found to be the most common reasons businesses fail?
A: How do businesses fail? Let me count the ways. Infinity is a good round number, but short of that, the most common reason for business failure I've encountered is lack of experience. It's difficult for lenders to watch historically successful people start businesses in which they have little or no experience and then flounder and fail. While accumulating experience in the industry you plan to start your business in won't guarantee your success, not having it can statistically increase your odds for failure. Other reasons for failure I've seen-such as insufficient capital, heavy competition, uncontrolled growth, inappropriate location, seasonal business, tax issues, fraud, management turnover or lack of proper planning-pale in comparison to lack of experience. As a good rule of thumb in business, don't do what you don't know.
Doug Hood is a co-founder of Rainmaker Capital Corp., a capital acquisition consulting firm in Cartersville, Georgia. Co-founder Marilea S. Hood contributes to this column. Send questions or anecdotes via e-mail to firstname.lastname@example.org.