30 Reasons Businesses Fail - Causes of Business Failure - Solutions to Small Business Failure - Reasons New Businesses Fail - 247Broadstreet.com


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30 Reasons Businesses Fail




Small Business Failure: Major Reasons Small Businesses or Companies Fail - Common Causes of Business or Startups Failure


There are very many reasons why the idea of starting a business is still attractive to people. You want to be your own boss and refrain from morning walks to work and the headache of dealing with bosses. You also have some money and you want to invest it as a side source of income to supplement your monthly earnings. Many people do not feel comfortable with a full-time job working for someone else. However, apart from giving up, they choose to be entrepreneurs and own businesses too. 



Freedom seekers start small businesses and resign from their full-time employment for the love of what they do. They believe wholeheartedly that the passion that drives them is crucial to their success. They want to feel in control, to control their career paths and work environments. This group wants things simple and manageable. However, one misery of entrepreneurship is the fact that most small businesses fail. The reality is that if your business failed, then you are not alone. The US Bureau of Labor Statistics keeps a tally of how often businesses fail in the country from year to year.

There are over 50% chance that a small business established is likely to fail within the first trimester or before the end of one year. The statistics also show that 90% of all the startup businesses fail. It takes the efforts of many people and a confluence of many factors to build a business. You need to assemble the right team, mobilize the right resources and stay high in competition in order to succeed. 




It is so hard to spot and point a specific reason why businesses fail. Some of them are influenced by a couple of factors that crumble it down. Some fail due to cash flow mismanagement, low wages for workers (lack of motivation) and others fail due to lack of market and competitiveness in the industry.

In this brief, I have listed and elaborated on several issues that may be the reason behind your business failure.  

1...Starting for the wrong reason

This is the root of all problems. According to Forbes, more than 0.5 million businesses in the USA rare up for the wrong reasons. Regardless of whether you want to run a small business and supplement your monthly earnings or whether you want to quit your current job and solely start a business, starting your business can be overwhelming. You may have all the resources both human and non-human but starting a business for the wrong reason will not take you far.

Before making a decision that is impossible or difficult to undo, you have to find the answer for the difficult questions before making the leap. You need to have a valid reason why you are starting the business and ensure it makes sense. This is the first method to protect yourself from unnecessary risks as a result of lack of motivation.

If you don’t start your business for the right reasons, then it is destined to failure. Research shows that the best business ideas come about as a result of a gap in the market. An opportunity that you would want to take and fill the gap. 





Some of the wrong reasons why people start businesses include.

To be rich - As a matter of fact, many entrepreneurs start a business to be rich. This is wrong, if money is your energy then you will fail before the end of the first year. Although it is true that you may be able to make profits that surpasses what you were getting working for someone else, the truth is it takes time and a lot of dedication to make the first profit. If money was your motivating factor, then am sure you will lose hope before your business stabilizes. According to business expert Patricia Schaefer, many people miscalculate the financial needs of their businesses thinking that it is simple and easy to start the business and recover the principal within a month.

Creating employment - Creating jobs for other people is not a bad idea, however it shouldn’t be the reason for you to start a business. When you start a business, you will see the highs of hiring and lows of firing. What this means is that the business will come to a standstill due to the misjudgment of efficiencies and costs.

Work less hours - This is one of the fantasies that any entrepreneurs have. You think that you will work for fewer hours once you start a business. You think that your current job is tiring by working from 8:00 in the morning to 5:00 in the evening. The fact of the matter is that if you start your own business, you will find yourself working for long hours to get your business out of the ground.

Be your own boss - some people think that the boss they relate to daily in their job areas is an oppressive figure that has no compassion. Therefore, they want to start a business and be their own boss. This is not a bad idea but with your own business, time will be your boss. Just like the boss in the company, you will have some goals to accomplish, a budget to consider and other outside factors. Therefore, when you get into your own business you will realize why your boss seamed so oppressive.

To be famous - This is what every person in the world wants. However, this is a wrong reason to start a business. The reality is that being an entrepreneur has some possibility of you becoming a public figure. Relentlessly, starting a business for this reason is going to take you away from the office most of the time and this is a bad idea.

There is a lot of good reasons to become an entrepreneur and therefore you should think carefully about the reason as to why you want to venture into business. This will be your personal motivational factor that will keep you moving. 




2...Businesses don’t fail - leaders do!

Poor leadership is the number one reason why small businesses fail. Your business is likely to fall if you exhibit poor management skills. Poor management skills can be evident in very many forms. One of them is the struggles you will be undergoing in making management decisions or supervising the staff.

Many entrepreneurs lack relevant leadership skills and they don’t have enough capital to hire and establish a professional executive. They lack relevant management expertise in some of the critical areas such as finance, supply chain, hiring and managing employees. A good example is an engineer who wants to quit his job and establish her own supermarket. If she doesn’t recognize that she lacks some business skills and take note of what she doesn’t do well, then the supermarket is likely to fail. 




Unbalanced management experience is the main reason why many entrepreneurs fail. You think that the former experience as an engineer, doctor, a teacher or department head is sufficient for business management. Most of them do not even have the managerial skills and hence they are likely to misguide the employees and eventually the business will fail.

It is the rule of every business owner to clearly define and communicate the vision of the business to the subordinates. If the leader is poor in vision determination and communication skills then the subordinates are likely to be misguided. Moreover, the vision of the enterprise should be in line with the values of the company. If this is not so, then there will be troubled waters ahead.

Some of the business owners lack the relevant skills and experience in the execution of the set rules and guidelines. Most of them do not focus on deploying the necessary talents and resources to ensure that all the demons in the business are managed.

In conclusion, dysfunctional leadership in your business will affect every aspect of your business. It will affect the morale of your employees, the relationship with your suppliers and also the productivity of your business. Therefore, one of the ways of dealing with poor management and/or leadership is to hire an expert in the relevant fields. However, if you want to manage your businesses personally, you can get back to college and study some of the leadership skills that may be beneficial for the future of the business. 




3...Bad Business location

This is a very crucial factor when we are talking about business success. The first step to take when determining your business location is your business needs and the target customers. There are several ways that location can affect the success of your business. The quality of workers is determined by the location of your business. If you are focused on attracting a fantastic and high qualified workforce, then think about the business environment and its vicinity.

A bad location can spell disaster even for the most managed businesses. A bad location will mean that your business will not be able to attract enough customers. A business should look for a position that gives them exposure to their customers. That is critical to increasing sales and ensuring high profits which is one of the factors why a business will be successful. 




A good position for your business will determine your level of competitiveness. The mistake that many entrepreneurs make is to set their businesses in a location that doesn’t attract many customers for their specific products.

The position will also affect your proximity and cost of raw materials. The costs that are associated with the transportation of raw materials from the source to the business. What this means is that if your business is located in an unsuitable location, costs will increase and you will end up closing down. This is what happens to most if not all small businesses. 




A bad position will also get your business a bad image. If the area that you have positioned your business is not consistent with your brand, then your business is destined to fail. Customers will question the quality of your products if you cannot be able to set a good location for your business.

The business location will also determine the growth of your business. The question here is whether your business has enough space for growth and expansion. If not then your business will not be able to grow and be competitive in the market. 




4...Poor financial management

This is another very common reason why businesses fail. As a leader or the owner, you should at all costs know where your business finance is coming from and where it is going. This will ensure that you keep track of all the leakages along the way that may be affecting your business productivity.

It is unarguably true that if you don’t have a well-set funding plan for your business, then you will eventually fail. At the initial steps, businesses take in a lot of money and may not be able to give any positive returns on investment during the first year. They are prone to a crisis during this stage and if you don’t have a financial plan that you can call upon at this point, then you will end up swinging in debts and eventually crumble down.

As a matter of fact, over 70% of businesses that were established between 2007 and 2012 had no defined source of their funding. The leadership did not have the relevant skills to manage cash flows, expenses, and taxes among many other financial issues. This was the source of failure for many of them. Your business should have a good accounting practice in order to avoid a financial crisis.

There are several ways that you can implement and reduce or entirely avoid financial mismanagement. You can make use of professional accounting software that will help you keep a record of all financial transactions including expenditures and cash inflows. You can as well hire a tax advisor or a general financial advisor if you entirely lack financial management skills. 





5...Believing you can do everything yourself

This is another challenge. Believing that you don’t need anybody else. Some of the entrepreneurs believe that they can have hands-on control of all aspects of the business. That they are the only people who should be making decisions regarding everything.

Successful entrepreneurs understand the benefits of delegating some of their powers to their subordinates. If you cannot trust them with the business decisions and operations then you are destined to failure. You should concentrate on the most important goal of the business and let your employees help you to reach them. Give your people enough responsibilities and authority over their duties.

If you don’t want to involve other people who are part of your business in your company’s decision-making process then they will think that you are dictatorial and end up demotivated to work towards the company’s goal. 




Seek out the advice of the mentors and those people who have experience and knowhow in the same field of business. Sit down with your employees and welcome views and suggestions. This is the best way to make your employees feel recognized and motivated to continue working towards the goal of the company.

As resourceful as you are, just know that there are some things that you cannot handle yourself. You need help from advisers, experts, employees, suppliers and customers. You can delegate some of your powers to employees and give them the authority of making decisions regarding small matters of your business. You can be dealing with bigger matters such as when and where to expand your business, who to employ and what qualifications they should possess and several other critical issues in your business. 




6...Ignoring the employees

Employees are most often frustrated by their employers. They want to feel that their employers notice them and appreciate their efforts. They want their employers to have their back and listen to their concerns. However, not many employers do this. Many of business owners or leaders ignore the powers of an employee and end up mistreating and exploiting them. This is the source of all the devils that kill a business. Some of the business owners feel that employees are their subjects and hence they should just always listen carefully and implement whatever they say.

Employees are motivated and inspired when their leaders make good, thoughtful and reasonable decisions. Low engagement drains morale and also limits the ability of a business to retain the most productive employees. This will affect the productivity of the company and eventually the cash flows. The company will end up closing as a result. 




7...Ignoring customer needs

Customers are the backbone of the success of a business. Without customers then there is no reason for the business to exist. Customers determine the productivity of the company due to their demand for the company’s products. Every entrepreneur will tell you that a customer is always right, however, very few businesses listen to their needs.

A larger share of businesses that fail lack touch with their customers. This means that they will not be able to understand the needs of their customers and improve their product quality where necessary. As a matter of fact, if the needs of the customer are not met then the customer will not come back for more products from your business. This means your sales will go down and eventually you will start making losses. 




You should keep an eye on the needs of your customers in order to establish a loyal customer base. Analyze their comments on the quality and the pricing of your products and services and hence be able to act swiftly and improve where necessary.

The customer complaint is a signal that shouldn’t be ignored. The way you listen to customer negative reviews and act accordingly makes the difference between success and failure in every market place. Actually, when customers complain, they are giving you an insight of what you should improve on. Business Psychology says that every customer acts on their own self-interest. This means that they are the only people who can tell you the unfurnished truth, something that your employees cannot say. If you don’t turn those negative feedbacks into positives then your business is prone to failure.

A good example here is Netflix, in 2011, they ignored the views of their customers and went on to split its DVD and increase prices. As a result, they had to lose a whipping customer base of 800,000 subscribers. Their stop price fell to almost half of their previous value and many people end up hating the company. This is a very good lesson that what customers say should be a top most concern of the company.

If your business is able to satisfactorily solve all complains, then this will result in an increase in the number of loyal customers. Therefore, listening to your customers is a way of marketing your business. You will be able to improve the quality of your products or services and customers will always be coming back. It will also result in a positive word of mouth pyramid. Customers will be able to talk positively about your company and hence attract more people to your business.

Train your employees to look for complains and view them as opportunities to build stronger relationships with the customers. Record complains so that you will be able to revisit them and determine the major source of this complains on a monthly basis. In addition, make sure that you solve them as quickly as possible. 




8...No written business plan

Statistics show that over 50 percent of those business that fail lack short-term and long-term planning. If you did not plan then you planned to fail. Every business should have the focus on where the business will be in the next few years. There should be some measurable goals and results that you will always be referring to. A good plan should include to do list and what to do and achieve the anticipated results.

If you have ever been in charge of a successful event then I bet you very well understand that if not for your careful, methodical and strategic planning then success would not have followed. This applies to businesses too and the power of proper planning shouldn’t be underestimated. Many businesses fail due to those small planning shortcomings that could otherwise have been avoided. 




A business plan should be accurate and based on accurate, current information and informed reasonable projections for the future. As a matter of fact, some of the banks insist on a well written down business plan before lending you a loan to start up a business.

You need to have a written business plan and treat it as a marketing document. It will be marketing your business to lenders, investors and other intellectuals in the society. Ensure it includes relevant statistics and facts that will be attractive to your readers.

Am sure no entrepreneur goes to business to fail and therefore you should be well prepared in order to succeed. A strong and a well-informed business plan is a vital outline for business success. It details a strategy and the way that the business is going to follow to bring in its revenues. If you will not be able to create a written business plan before you launch your business then you are less likely to succeed. 




9...High Debts

Many people rely on debts to get the capital they need to launch their businesses. However, high debts can be a double-edge sword for small businesses. The problem comes the time you are required to repay the loan. When your business spends a greater percentage of the cash flow on repaying debts, then you know it is time to fail. Your business should use the cash flows in expanding the customer base, adding employees and expanding.

The reality in business is that you are either a master or a slave. You either owe your business or you own your business. However, do not owe your business, ensure you own it if you want to succeed. Start your business from zero dollars and grow it to a multibillion-dollar company rather than digging yourself into a hole of debts. 




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Try doing a research about those people in your society who advise you to take huge loans to finance your business. Do you see them in debts? Do you think their businesses are in debt right now? If your answer is no then ask yourself what they did to get out of that situation. I am a little bit sure that they either started with a low debt ratio or they may also have started from zero without any debts.

Ensure you don’t acquire liabilities to build assets. Ensure you are always working towards eliminating all your liabilities. Your number one goal should be to get rid of all the liabilities, debts and concentrate on building your business. 




High debts well make your business lack flexibility to keep up with the competition and hence it will fail. Many people say that it is a good idea to go in debts to start a business. It may be a way of raising your initial capital investment but I wouldn’t recommend going into high debts in order to start a business. Most probably, you will be using almost 95 percent of your cash inflows to repay these debts.

Although you are getting into business to raise the startup capital for your business, not all debts are friendly. Some of them will make your business go down. If you have to use loans and other debts to finance your business then consider creditors who are providing loans at very low interest rates. Some of credit unions have high interest rates and you may spend very many years just paying for the interest. 




10...Lack of determination and persistence

The fact is that most if not all of the investors will say no when you present them with an investment opportunity. This is the genesis of persistence. You should always be at the top notch raising your capital.  Do not be discouraged when issues arise or when several investors turn you down. It’s a matter of time before you meet someone who will make your business dreams come true. Do not let the ‘’no’s’’ from the investors put you down. If an investor is not willing to invest in your business ask them for the reasons and if they can be able to refer you to some other potential investors. 




The first step in luring someone to invest in your business is to invest in it too. Giving up at the early stage will not lead to new opportunities. You should be determined to achieve all your goals before you seek people to help you achieve them.

If you can be able to get the reason why an investor is not investing in your business then it means you will be in a better position when approaching other investors. Lack of determination and persistence is also a reason why many businesses fail in their first trimester. You will be discouraged in your quest for investment capital and if you are not strong enough you can end up giving up.

A good business plan is the difference between a great idea and a dead idea. If you present your business ideas well to the investors then you will never get a no from them. That idea will be turned into a multi-million dollar company soon and you will be on your way to achieving greater heights. 




11...Miscalculating the competition

You are probably not the first person venturing into a business in that industry. There are a thousand other business people who have experience and expertise to do competent business in that field. Therefore, if you don’t calculate the level and impact of competition in that field then I can bet you are on the wrong path.

You cannot just start a business thinking that you are the only product or service provider in the market. There will always be another person in business selling the same product or providing the same services. Therefore, the success of your business will be determined by how good you are at dealing with competition. 




Stiff competition is bad for small businesses. There may be a large company providing the same products and services to the already existing customers. They are most likely to have dominated the market and definitely your small business can have problems getting into the market. However, you may finally manage to enter the market but take long to make the first profits from sales. This is the top most reason why you will end up giving up and your business will fail.

What you are supposed to understand is that when your business if entering the market, you can be running on negative profits. If you have debts to cover then be sure you will not be able to make it through.

Most of the small businesses do not have resources to expand and therefore can fail easily. 





12...Lack of capital

There is not even a single entrepreneur who goes into business with a plan to not succeeding. However, there are several issues that may arise and pull your business down. One of those is inadequate access to working capital. Your business relies entirely on its ability to sell products, attract payments and meet obligations in order to reload stock of inventories.

Many other reasons why small businesses fail to go into owner’s inability to raise working capital. Your business will not be able to attract investors since they will be thinking that your business is not stable enough. It starts with a low credit score, and the owner’s inability to borrow from traditional financing sources to other operational issues that affect cash flow.

Lack of capital may be an alarming sign that your business can crush down at any moment. It also shows that your business may be unable to honor the bills, loans, salaries and other financial commitment. Therefore, lack of capital may jeopardize day to pay operations.

The truth is, most entrepreneurial ventures will fail before someone makes the first dollar in their business simply because they fail to raise their initial funds. The reason why some of the businesses end up in a financial crisis is lack of good control of costs. You should manage the payrolls and other expenses. What this means is that you should be ruthless with expenses so that you will be in a better position to take care of future expenses.



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Another reason is not saving during good times. Saving during the good times is a very good way of hedging the risk associated with bad business times. The problem is that too many business owners would rather spend than save. This means that when bad times strike, they may end up succumbing and closing down their businesses.

Some of small business owners are not bankable. If you are running a business to minimize taxable income then you will not be able to attract bank loans. You need to convince your bank that you have a profitable business and you can be able to honor your dues. Lure your bank with money to see what the banker would need in case you want a loan from them. This way you will at least have a way to raise your operational capital in case your business lands in a financial crisis.




13...Premature scaling

When am talking about premature expansion then am talking about scaling your business before it has established deep roots in the market. This is a major reason why some small businesses fail. Some of the companies such as pets.com failed due to the same reason.

Scaling is not a bad thing, but scaling prematurely can destroy everything. You may be hiring too many employees to market your business or you may be spending a lot of the money on marketing. Take enough time to learn your business before you scale it. What this means is that you should not scale your business unless you are ready.

Some of the business owners are so impatient and think that they have enough guts to open nationwide branches too soon. This will be the fall of your business. You first have to establish your main business before expanding to other places of the country. Premature scaling has been found to be one of the major overlooks by the business owners and at the same time the most consistent predator of startup failure in small businesses.

Research shows that 90% of the time, small businesses fail due to owners’ self-destruction rather than competition. This doesn’t mean that the 10% of businesses that succeed had a smooth path. They go through near death experiences before they make it by grace. All these things are caused by premature scaling of businesses.  Another Startup Genome Report Extra on Premature Scaling by Max Marmer and the colleagues found that 70% of businesses and companies scale their business prematurely. The same report showed that 74 percent of these businesses fail due to the same reason.

The main reason why premature scaling is found to be dangerous for small businesses is that it is so deceptive. All the things that accompany scaling such as hiring, expanding, funding and growth are good things but now most of the businesses do them out of order.




Some of the signs of premature scaling include overspending - You are in business to make money. I don’t think you can make enough money to sustain your business if you are overspending the company’s earnings. This is the reason why most of those business that scale prematurely fail to meet their financial obligations in time.

Another sign is having too many employees - When you are starting a business and you are in the hiring phase then you should ensure you are cautious and careful. This is where most businesses fail because an additional employer means an additional commitment and a drain on the resources. Am not saying hiring is a bad thing. It will come but you should be on the safe side and hire the right number of employees with the required qualifications. 



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14...Lack of product improvement and development

Quality of your products and services has a direct bearing on customer satisfaction. If your business is not providing quality products and services to the customers then it is likely to fail. The opposite is also true, if you provide quality products then your customers will rank your company high and they will always come to purchase more. If a customer is dissatisfied then they become vocal in criticizing your business and you will end up losing the majority of them.

One of the ways to maintain a high product quality is through product improvement and development - How you get along studying your market, planning, implementing and evolving is very important. Continuous improvement can range from simple changes that you make from day to day to major shifts in the direction of the company. A company that doesn’t evolve is more or less equal to a dead man. It cannot be able to increase the number of customers or even attract more earnings.

The bottom of the matter is that small businesses lack knowledge of their environment - The owner may not detect a change in the market that needs a swift action. Therefore, they delay in implementing several measures that can affect consumer satisfaction and end up exciting the market due to competition.

The fact that small businesses are owner managed means that the business owner is more concerned about personal attitude and choice when it comes to product improvement and development. This means that they will concentrate on issues that affect their earnings rather than those that affect the consumer satisfaction. The business will thus end up losing a greater share of their customers to other rivals in the market who are more serious about product quality. 




15...Another reason why small businesses fail in product improvement and development is lack of resources - This also plays a deciding role in the choice that the business owners make. Product improvement and development need a lot of resources from the cost of production to the cost of marketing the new products in the market. Hence, most of the small businesses end up failing due to lack of a quality and value added products.

Quality affects a business in many ways. It will affect your productivity, your profitability, customer satisfaction and public perception. Therefore, focusing on the quality of your products and services will keep your business strong.

16...Lack of a succession plan

According to a report on the small businesses in the UK, it was found that up to 100,000 small businesses in the UK close yearly due to lack of an appropriate succession plan. Although these businesses are provided with considerable support for their start up and growth, the succession plan is not given enough weight.

Majority of those businesses that fail due to lack of an appropriate succession plan are family businesses. Most business owners want to fuel their businesses and eventually pass them to the next generation. However, there is a little number of them who succeed in doing so. Several studies show that only two-thirds of family businesses make it to the next generation.

The absence of an appropriate succession plan can greatly impact to your business growth. It makes it harder for businesses to generate new ideas for the success to come. If the business is entirely relying on the owner’s specific knowledge which cannot be easily passed on to a successor, then your business is at risk.

The lack of a suitable and a willing successor drawn from the list of the available employees or the family makes it difficult for the business to keep moving when you’re not there. What follows is either mismanagement, waste of resources and eventually the business shuts down.

Most of the reports encourage business owners to address the succession matter at an early stage, promote awareness of the succession procedures, and improve the quality and availability of advice for the business owners to come. The company should as well establish an effective succession support and make it an integral part of the business. The business can also provide the employees and other stakeholders with the information, training, advice and support about the succession matter.




Many small business are owned by people who never think what would happen to their family in case something happens to them. What would happen to their businesses, whether it would stay solvent, whether it would be sold, or whatever would happen to their customers when you are not at the helm?  That is the reason that when death strikes small business owners then their businesses end up being sold or exiting the market due to succession rivalry.

If you want your business to pass to the next generation and still stand strong, then consider the situation of your family, employees and the customers and establish a proper succession plan. You should first select your successor through careful analysis. Then determine your business evaluation bearing in mind that when a business is sold to family members the transaction draws extra scrutiny from the IPS. Then lastly develop a plan that would be adopted when transferring your business interests.

17...Outdated technologies

Outdated technologies in small businesses in the U.S and several other countries of the world is creating hidden but significant losses for the businesses. One of the features of most small businesses is lack of improved and modern technologies. According to a study that was carried on by Samanage-an enterprise service management software company, more than a third of employees that is 36.8% say that their company’s technology is outdated and doesn’t add any significant value to productivity.

If your company has the outdated technology then be sure that worker productivity will be hindered. They will not be able to work and be productive the same way as their counterparts in big companies with modern high effective technologies. The firm’s State of workplace survey that was carried out some few years ago found that workers in small businesses spend more than 520 hours a year on repetitive tasks that could otherwise be automated. This translates to business losses of up to $13,202.80 per employee per year.

These values are very significant when we talk about the company’s profitability. If the company is not able to adopt highly effective modern technologies then it will make losses until it closes down. This is one of the reasons why small businesses close up within a period of one year after start up due to losses.

Older equipment is prone to failure and hence increase the downtime. This means that the equipment spends a lot of time out of work which also adds up to your losses. The operational and maintenance costs will also be high and the replacement of these equipment becomes harder and harder with time.

What some of the small business owners don’t know is that the time and money that is used to repair and maintain old equipment makes sense to invest in a new technology. If you want to increase profits in your company and stay in operation, then you need to carry a risk assessment and prioritize equipment that is used on daily basis.

Small business owners have a lot of responsibilities and all in one can be overwhelmed and close the businesses if the efforts are not paying well. Technology has been a game changer for both small businesses and large businesses entrepreneurs.




18...Thinking that any legal problems can be dealt with later

Several small business owners have a tendency of thinking that if they get funding or once they are up there operating, then they will be ready to hire a lawyer. Despite the fact that you may manage to get up and running before getting a lawyer, this is a shortsighted logic.

Many of the mistakes that are done during this initial process are hard to deal with later. This is the reason why your business can be burdened with issues until it fails. You should devote most of the time and resources dealing with issues once they arise. Failure to do so then you are digging your business into a hole that may be difficult to get out of.

It will cost less money to hire some competent legal mind that will always be taking your legal cases and release you from the burden. Get it right at the beginning of your operations rather than sorting it out later.

19...Lack of focus and foresight

Business focus is the art of limiting your scope to that common thing that really matters to majority of customers. Lack of focus can greatly affect your business. Many entrepreneurs think that adding more features in products and services will turn out to be more appealing to the customers. Instead, it will be in large extent confusing and end up affecting the business. The odds of a non-focused business to struggle for survival, lose market, miss an opportunity to capitalize on their scope and lose investors’ attention is very high.

Marketing a product with too many features that are confusing is self-defeating. The more you try to add more features to your products the more your customers will get confused and eventually settle for a competitor who is more focused. In the business domain today, the market is found to change after every 90 days. Therefore, if you are not focused enough you can lose your customers without even noticing. 




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One of the reasons why you need to be focused on business is the reality that competitors are always at your neck, looking for an opportunity to lure your loyal customers into their business. Therefore, you need to keep your customers aware of the differences between your products and services as compared to those of your rival business people.

When your solution is characterized by many elements, then you also cannot keep the priorities straight. This will make your team frustrated and end up pulling your business down. What this means is that you should first teach your business to walk before you lead it to run.

Focusing on the wrong things is equally destructive and unproductive for your business. In most of the competitive environments, business focus is not the most important thing. The important things are the quality of your products and services, the distribution channels, simplified pricing structure and better customer service. They determine how competitive your business is.



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20...The one thing that every entrepreneur needs to focus on is the strategy - The strategy needs to be very simple, straight, written down, and it should be communicated regularly to the team members. The last but not least thing that you should focus on is emphasizing straight and measuring success regularly. This is a way to learn where there are leakages that are draining your profits. You can then correct on them and be able to raise enough income from your business to make it thrive.

21...The company should also have foresight - The fact that you are the owner of your business means that you should have a long-term sight on the achievements of your business. In contrast, some of the businesses that are managed by CEOs tend to have a shorter foresight since the CEO is there for a short time. He will set goals that can only be achieved in the shortest time possible. A good example of a company that was outwitted by rivals due to lack of foresight is Nokia. It was among the first telecommunication companies in the world. However, due to lack of foresight, it ended up being surpassed by new bays in the same industry.




22...Ineffective marketing - Another reason why small businesses fail is operating in darkness - Customers cannot purchase your products and services if they don’t even know they are there. Some of the small businesses do not have appropriate marketing strategies such as online marketing, emails, local search, social media and many more. The purpose of marketing is to inform your customers about your products and why you think they should choose them over those of other companies. If your customers do not get enough information about your products, then be sure they will not purchase your products or order your services.

Some of small business owner do not want to spend money on advertising. Therefore they end up making fewer sales than they could actually be making after the advertisement. It doesn’t matter whether you have been in business for a long time. Other companies will enter the market and if you are not careful they will take your customers. Customer loyalty doesn’t just happen. You have to earn it through promotions and advertisement.

Watch and analyses your competition carefully and stay one step ahead through strategic marketing. Hence, if you don’t take good care of your customers, then your competitors will.

Successful business owners in the industry understand very well the advantages of marketing their products and services. One of the problems with small business owners is that they don’t take advantage of easy-to-use marketing approaches.

Research shows that the national average for marketing budget is supposed to be at least 10.2%, however, small businesses invest as low as 3% in marketing. This is the reason why am convinced that if your business is not producing and marketing their products effectively, then you are bound to fail.

The fact is that small businesses cannot compete with the big fish in the industry but they can at least be able to invest in data-driven marketing. Some of them include live charts, Analytics, social intent, ratings and review. All these are the insights that a small business can adopt and be able to make their products known to the public. 




23...Lack of website and Social pages

The reality of the matter is that if your business has no website that shows in major search engines, then your business will remain invisible. Small business holders don’t ask themselves the major questions that are relevant when marketing their products. They don’t answer to the questions whether their full product package is available in their website, whether their website includes a clear call of action, whether their website is mobile friendly or whether their website has relevant keywords that show up in major search engines.

Research shows that there are nearly 28 million small businesses in America that generate up to 54% of the total domestic revenue. However, nearly half of these small businesses operate without a website. Many small business owners think that a website is not in the business’s short-term future. Several other companies and businesses always postpone the launch of their websites to a later date.

The most astonishing thing is that even in 2018, some of the small business owners consider a website not irrelevant. Whatever you do with your business, the foremost strategy is to create awareness. There must be a cost that is associated with this move and hence you should be ready to incur. If you plan to avoid or skip marketing tools in your business, then you should be ready to fail and exit the market.

A business that lacks a website looks outdated. They have no platform to tell the public who they are and hence they end up making small sales that cannot eve sustain operational costs. A website is important, it will give you an opportunity to show the world what you do and how uniquely you do it. This will attract additional customers and hence you will make huge profits.




24...Failure to adapt to changing conditions-Evolution

As I had said earlier, the state of the industry that your business is operating in changes almost after every 90 days. Many small businesses concentrate on marketing and other promotional processes and forget to monitor industry trends. Most of the managers struggle with time management and sometimes they are caught off-guard by circumstances.

This is one of those areas that are so important in any business whether small or large. It is worth the investment of time to avoid being outdated and obsolete. There are some good examples in your history of companies that didn’t evolve accordingly and now they are either small or they already got pushed out of the market. Some of them include Nokia, Blockbuster and Kodak.

As a good business manager, you are supposed to learn from the failures of others. The above companies were once industrial giants and they are now humble on the ground. If you don’t want your business to be the next, then watch, analyses and respond swiftly to industrial changes.

25...Poor customer service

There was a research that was carried recently and found that 88.9 percent of your business customers defect from your products or services due to poor customer service. Therefore, poor customer service is considered a secondary cause of many small businesses crushing down to the ground. The primary cause is financial crisis that small businesses encounter.

Bad customer service is directly proportional to poor management, and not paying attention to the business needs. In this case, it may paint your business image as a business that is staggering in financial problems. Some of the companies that dominated the market due to improvement in their customer service are Dell, Techno, and many more.




Some of small business owners think that customers are wrong and hence do not pay enough attention to what they have to say.  In the late 1970s, a retail institution W.T. Grant went bankrupt for the failure to realize that middle-class Americans were moving to the suburbs which was a huge threat to the company. The management thought that the customers were wrong and hence did not consider shifting their retail shops from downtown. This shows there is some truth in the saying that goes ‘a customer is always right’. You have to pay attention to what they are saying and act accordingly.

A vast majority of small businesses do not strive to maintain their focus on customer service and that is how they end up closing. Customer service is one of the golden rules of business that should highly be acknowledged by every business holder.

On the other hand, customer services is a tricky art to master for small businesses. In some cases there is nothing you can do to appease an angry customer but the approach that you take when addressing his or her case can leave them feeling satisfied. A business that is focused to succeed should listen and pay a lot of attention to customer needs.

You should listen to what your customer wants and know mechanisms of addressing those claims once and for all. What most of the small businesses lack is the ability to improve on places that their customers are complaining about. One of the reasons being financial constraints and others is ignorance.




26...Failure to build a strong team

In every business, its productivity and profitability depend on the labor force. It is one of the factors of production together with capital. Therefore, labor just like capital is necessary and very crucial when determining the productivity of a company. Entrepreneurs and small business owners need a strong team of both advisers and the workers.

Research shows that a startup biggest challenge is to get the right team for the business. Some of the small businesses end up mobilizing a team that cannot reach to the full utilization of the resources at their disposal. This impacts directly on the company’s success.

Some of the small business owners do not trust their team to give them enough control over their responsibilities. The possible consequences are that they fail to operate the company’s tasks at the maximum potential and eventually lead to poor performance. When the company is not maximizing its resources then it is destined to fail as a result of losses.

There is a reason why the most successful businesses in our society understand the need of having a strong team.

A team that is always focused on maximizing the company’s profits. What you have to understand is that your work team is what holds things together. Sometimes ideas in the work place can change, the products may pivot, and sales can go down due to market changes. But if you have the right team then you can be able to fix things faster enough.

A great team is not just selecting a team of people with sophisticated ideas as many business owners think. A strong team is the one that is complementing, the ones that appreciate each other’s efforts and work together. A team that mitigates each other’s weaknesses and ensures the work is done the right way every day. That is what a business needs. If your business has no team work, then it is not going far.

You need to have a team of smart people too. Those that can work with minimum supervision and those whose effort is not affected by your presence. As a business owner, you have to retain a strong team of the right people to build the technology, understand your industry and scale your company.

27...Running out of cash too fast

There is no entrepreneur who wants his or her business to fail. However, very many people start a business without thinking about the future needs of the business. Small business owners think that sustaining a business doesn’t need a lot of money as it is needed when starting it. The truth of the matter is that your business needs money to stay fit and stable. If your pockets are drained within the first few months then you cannot keep on, you have to relax your rope and exit the market.

Money is not everything that a small business owner needs in running the business but if you run out of it, there is not much that can be done to help. Small businesses cannot afford to joke with the powers of cash when running their affairs. Big companies can be able to take a risk with their money by dedicating some to crazy ideas. This is unlike small businesses which most of them are running on debts and loans.

Research shows that most of the small businesses that fail are not insolvent or unprofitable. They simply ran out of cash. As a small business holder, managing your cash is the single most important thing that you should do. It doesn’t matter how much money you raise but how well you manage it.

The biggest mistake that most business owners make is overspending. Spending money on features that are not really needed. Some of them spend their budget with no control on measuring what they are getting back.




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28...Poor allocation of resources

This is the disease that is eating most of small businesses. They misallocate their money on things that don’t bring any significant benefit to the company.  In their bid to keep up with the existing competition in the market, small businesses are under pressure to spend on several investments that may hurt the business operations.

Some of small business holders want to hire more employees in their bid to increase their production and increase sales. What many people don’t know is that additional employees may hinder production due to lack of space and increase in production costs. This is the reason why they end up closing down rather than growing big.

Some other owners may want to move to a bigger office or even offer better employee benefits. Am not saying all these measures are wrong, but you need to move slowly. You have to determine the cost benefit of all these options and implement the one you think can benefit the business.

On the other hand, small business owners tend to use some of the business resources for personal gains. Apart from allocating a business vehicle for transporting the business products you use it for personal transport and other things. What they don’t know is that they are adding ghost expenses to the company that can impact greatly on its profitability.

Starting small doesn’t mean living small, you need to allocate resources very well and avoid misallocation. Avoid overspending by prudently allocating resources that your business is endowed with. You should always weigh the pros and cons of a certain expense that you are planning to undertake. This measure will let you determine the things your business can do with and the ones it can do without. In addition, you will be able to invest the limited resources to those things that will be beneficial to the company.

Involve relevant authorities and smart minds when determining where to allocate money. This will aid you in brainstorming more cost effective alternatives that will not hurt your small business. 




29...Mixing personal and business expenses

If you want your business to be successful, keep your personal expenses far away from it. Your business should always be independent. Most small business owners are the top most decision makers. Therefore, it is easy to mix your personal and business expenses. This is one of the reasons why small businesses will be burdened with ghost expenses that increase the production cost and decrease the profit there after.

Mixing personal and business expenses is tempting because it is easy but simple to kill your business. One of the reason why you should never mix personal and business expenses is because of tax. Tax is confusing and hence you should have a straight forward way of ensuring it doesn’t affect your business.

If your business and personal expenses are tied, then it can affect your credit score. Until you separate them then your business will not be building you a credit history. This in turn can make you lack funding in case of a financial crisis.

When your business lacks the boundary between personal and business expenditure, then it makes poor book keeping, filling taxes, balancing accounts and creating financial goals. Most of small business owners have a joint bank account. This is the root source of overspending and mixed expenses. If you are an entrepreneur who is focused on growing his or her business, then you should keep a separate bank account. Each entity should have its own source of money and a way of getting payments.

Another way out of this problem is avoiding getting money in cash, this will reduce the chances of using business money for your personal expenses. You should also be paying the suppliers through the bank. Make it a point to never deal with money directly.

Last but not least pay yourself a standard salary. Make the relationship between you as the boss and your business official. You can write yourself a check each month from your business checking account. You should stop counting yourself as the ultimate boss and consider yourself as a worker. Behave as you could behave if you were working for someone else. Keep track of the personal spending that affects your business. Ensure you don’t use the business resources including money to fund your private tours. This is one of the most common expense that when linked to your business can affect its operations.




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30...Starting a business while employed by a potential competitor

The law is clear that if you are currently employed by a company that is a potential competitor you cannot start a competing business. Many small business owners fail to resign before starting a competing business. What this means for you is that when you do not consider the legal procedures then your business can be prone to legal issues that can lead to closure.

Even after leaving the current employer, you cannot go and disclose the company’s secrets. Under the inevitable disclosure doctrine, if someone leaves their current job and starts working for another company with similar responsibilities, then it is common knowledge that they will use the information that they had from the previous employer. The law stipulates that you can face an injection that prohibits you from working for the new employer until most if not all of the trade secrets are stale.

Some of the small business owners also employ workers without first checking with their current employer about the signed covenants. You should first of all check with their employer to get an insight of their knowledge of trade secrets.

However, states and countries vary on how they approach this issue. Some of the laws may be open for a dialogue between the two companies and others may prohibit your next job up to a maximum number of years.

The biggest problem with many small businesses is that owners assume there are no enforced laws regarding your current employer and your next job. That is the reason why most of them succumb to the legal provisions of a country and end up closing. Therefore you should find out and see what assignments of inventions that might have been signed. You should check if there are any signed covenants not to compete. 




In conclusion

Success in business is not automatic and it isn’t gained by luck.  Therefore, you have to get it out of your own efforts. It also depends entirely on the owner’s foresight and the organizational strategies that make you unique from the pool of available competitors. Teach yourself to learn from the mistakes of small businesses that failed earlier before you establish your company. Try to find out more about the causes of their failure and act differently. I bet all the businesses that close had a reason to do so. Some of those reasons I have already briefed and hope you now have an insight of what you should do to your business and avoid failure. There is nothing as shameful and frustrating as failing. You will have lost some if not all of your resources including money and time. Therefore, if you have plans to start a business either for your full-time income generation or to supplement your monthly income, just be careful and involve critical issues in your analysis.

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