The top overall reason why small businesses fail is due to being under-capitalized, not having enough cash to sustain your business operations. Not having the capital to grow, hire new people that will allow your business to grow, or not having the capital for inventory to profit from is a death blow to anyone.
Things that are overlooked during the startup phase will come back to haunt you. Having a capital reserve is an absolute necessity or having a strong relationship with your bank or lender can often save a business.
Eventually, your business will plateau, and you may not have the capital available to help you not only get over a “hump” but also to maintain cash flows for daily business operations. One small emergency can cause you to deviate from your current cash allocations and cause you to spend elsewhere while exposing your business to a future downfall.