Lack of capital: Why most small businesses fail

Running a business is never an easy feat, it's a risk and according to the Small Business Administration (SBA), a big number of companies fail within the first 18 months of operation. We all know that there are a lot of factors why or how a business may fail, but one of the major factors is the lack of capital.

This happens especially to a vast number of small businesses. As a business owner, one of the most important things to do or know is to be aware of how much money your business needs to have to be able to operate on a day-to-day basis. However, this is something that the owners of failing companies, failed to do. Therefore, revenue that's generated is not enough to cover the expense of the company's daily operational cost.

Other than, not being in tune with how much profit is generated by sales of products or services versus their spending costs, most owners miss the target on the pricing of products and services. This is common when businesses attempt to beat their competition by offering lower pricing for their products and services to attract more customers, especially in industries that are highly saturated.

At times, this strategy does work. But in some cases, businesses fail to earn enough revenue for keeping the prices of their services and products low for too long.

Younger companies also experience difficulties in obtaining enough funding to finance an expansion either to market and advertise their products and services or simply just meet the growing demands for their products or services.