The Jamaica Business Development Corporation (JBDC) is seeking to address early-stage micro business failure due to weak financial planning stemming from a lack of entrepreneurship education.  

Acting CEO Harold Davis explained that many ventures collapse within months because entrepreneurs enter business without a clear strategy or financial roadmap.

“Unfortunately, too many persons go into business out of necessity rather than to meet a specific need,” Davis said. “So, it’s survival-driven entrepreneurship rather than need-driven and strategy-driven entrepreneurship.”

Survival-driven entrepreneurship, or necessity-driven entrepreneurship, is often motivated by the need to generate income for basic survival rather than to exploit a market opportunity.  Without a clear plan and strategic financial direction, these types of businesses remain stagnant or fail at the early stage.

JBDC says education and mindset are critical to reducing business failure. The acting CEO stressed that understanding financial information is essential to business survival. “Finance is the language of business. If you don’t understand your numbers, you don’t really know how your business is performing.”

He added that this gap is especially common in skill-based and creative enterprises, where talent is strong but financial knowledge is limited.

Financial planning not an afterthought

Calculating the potential start-up cost for the business venture is one of the most overlooked steps when starting a business.  That view is echoed by Melissa Barrett, manager of JBDC’s Business Advisory Services Unit, who says poor financial planning is the leading cause of early business failure.

Start-up costs are the initial expenses that new businesses must cover before they can begin operations. These include legal fees, office space rental, initial inventory, marketing, and employee salaries. 

“Most start-ups don’t fail because of bad ideas,” Barrett said. “They fail because of poor planning. They run out of cash faster than expected because they didn’t fully understand their start-up costs or how long it would take to reach breakeven.”