01 Common reasons businesses close
These show up again and again among small businesses. Most can be seen coming months in advance.
- Running out of cash while still profitable on paper.
- Not checking demand before investing in machines or stock.
- Pricing too low to cover fixed costs.
- Depending on one or two buyers.
- Mixing household and business money.
- Borrowing heavily for buildings and machines too early.
- Missing tax and labour filings until penalties pile up.
- Partners falling out with nothing in writing.
02 Build a cash buffer
A cash buffer is money kept aside only for bad months. A common rule of thumb is three to six months of fixed costs. It is advice, not a law; seasonal businesses may need more.
Build it slowly: put a fixed share of every month's profit into a separate account until you reach the target, and refill it after you use it.
Example (hypothetical numbers, not data): fixed costs are ₹60,000 a month. A three-to-six-month buffer is ₹1,80,000 to ₹3,60,000. Saving ₹15,000 a month from profit builds the lower target in 12 months.
03 Do not let one customer own you
When one buyer gives most of your sales, that buyer controls your price, your payment terms and your future. If they leave, you can drop below break-even overnight.
Many advisers suggest that no single customer should be more than about a quarter of sales. Again, this is a rule of thumb. If you are above it, start adding buyers now, while the big one is still with you.
Example (hypothetical numbers, not data): monthly sales are ₹5,00,000, of which one buyer gives ₹3,00,000 (60%). Contribution is 30% of sales and fixed costs are ₹1,00,000. Today, contribution = ₹1,50,000 and profit = ₹50,000. If that buyer leaves, sales fall to ₹2,00,000, contribution to ₹60,000, and you lose ₹40,000 a month.
04 Habits that keep you in the game
Grit is not only working hard. It is looking at the numbers every week, acting early, and growing at a pace your cash can carry.
- Check four numbers every week: cash in bank, money owed to you, money you owe, and sales against break-even.
- Test small before you invest big: a trial batch, a market stall, a few sample orders.
- Chase payments on the due date, politely and every time.
- File GST, EPF and other returns on time; penalties drain cash quietly.
- Talk to your bank early if a repayment looks hard; banks have more options before a default than after.
- Keep learning from customers who stop buying: ask them why.