This article are provided for information purposes only, and are not intended as legal advice.

Disadvantages of a start up business

January 26th, 2009

Yesterday’s article highlighted the advantages of a start up business.  Here is a list of disadvantages

  • high risk of failure in first two years of operation
  • higher risk then buying a business which has been in operation for several years and has a history of cash flow and customers
  • may require your own capital to operate the business
  • since you are a new business, you may not get credit from the banks
  • may need to borrow money from family, friends and credit cards
  • may need capital injection from angel investors or venture capital firms
  • credit difficult to obtain until companies is 2 years old
  • may have cash flow problems, you may be required pay for services/products up front but not collection your receivables for a while.  There is a timing difference between cash out and cash in
  • owner is responsible for all aspects of business and may not have expertise in all areas
  • owner is responsible to find out about licencing, marketing, services and sourcing products
  • no one to help you other than friends and family who may or may not have your vision or passion

Filed under: Starting a business — Gary Landa @ 10:40 am

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