Reasons Businesses Fail

5 Causes of Small Business Failures

Owning a business can be rewarding and at the same time very stressful and risky that is why it is very necessary to appreciate the things that can result to business failure in order to manage, resolve or avoid them.

Note: Running a business is also not a child’s play!

It’s a sad fact that 8 out of 10 businesses fail, however, many of the causes can be prevented. Therefore it is necessary to understand what can lead to business failure and how each obstacle can be managed or avoided altogether.

According to research, only half of new businesses survive for the first five years and only a third of new businesses are able to survive for 10 years. We can also conclude that about 65% of new businesses don’t make it to the ten-year mark.

Inadequate Management

Many a report on business failures cites poor management as the number one reason for its failure. New business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees.

A strong management team is one of the first additions a small business needs to make to be able to have seamless operations that can last into the future.

Business Management
Management meeting. ( Photo by Headway on Unsplash )
Lack of Capital

A common cause for failed businesses is having insufficient operating funds. In most instances, a business owner is intimately aware of how much money is needed to keep operations running on a day-to-day basis.

It is imperative to ascertain how much money your business will require. You need to know not only the costs of starting your business but the costs of staying in business also. It is important to realize that many businesses take a year or two to get going to talk of turning a profit.

No Website and No Social Media Presence

If you have a business today, you need a website and a social media presence. Period.

At the very least, every business should have a professional looking and well-designed website that enables users to easily find out about their business and how to access the products and services being offered.

AFROSAGES without business failure

If you serve local customers, your website should include your address, phone number and hours of operation, and should be listed in Google My Business so it will show up when shoppers search for what you sell by location.

You also need to have social media profiles on the services your clientele are most likely to use for the same reason. If you don’t, you won’t look professional and will lose business to competitors who do at least have profiles on popular social media sites.

Lack of Planning

Small businesses often overlook the importance of effective business planning prior to opening their doors.

It is critical for all businesses to have a business plan. Many small businesses fail because of fundamental shortcomings in their business planning. A proper business plan must be realistic and based on accurate, current information and educated projections for the future.

Marketing Mishaps

Business owners often fail to prepare for the marketing needs of a company in terms of capital required, prospect reach and accurate conversion ratio projections. When businesses underestimate the total cost of early marketing campaigns, it is often difficult to secure financing or redirect capital from other business departments to make up for the shortfall.


There are other factors or reasons an entrepreneur might experience business failure, like;

The Wrong Location, Over-expansion outside the scope of budgetary allocations, Providing Bad Service, Uncontrolled Expenditure, Misplaced Priorities, Lack of Strategies, Non-Retention of Earnings to support the Business Funds among a tall list of things.

Overcoming these listed causes and the other unnamed ones, you are not far from being a success in any chosen field in business.

As I wish you well in your business, it will be good if you share this article with your friends using our social media sharing buttons, maybe they will learn a thing or two that can change their business or mindset towards business. Cheers to Growth and Making Profits!

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