Reasons Small Business Fail: 6 Big Signs

Success leaves clues, so is the case with failures. Any failure can be traced and tracked. Hence, the reasons small business fail can easily be ascertained.

Many studies have made a threadbare analysis that why startups, new enterprises, new ventures, begin and perish as soon as they come. 

About 20% of small businesses fail in the first year of beginning, 30% in the second year, and more than 50% before their fifth birthday. 70% finish before attaining the age of 9 years.

The reasons small businesses fail are many. Some are pivotal and some emanate from their pivots. This creates a sense of insecurity in the minds of budding entrepreneurs and they flinch from taking a big leap forward. They either find it too risky or too intriguing. 

The sole purpose of this article is to pinpoint the reasons small businesses fail so that we could get prepared accordingly for our new ventures and enterprises.

Reasons small business fail-1

Weak or blurred vision of the mission

reasons small business fail 1

Vision comes first. Your vision begets your mission. When your vision is weak your mission is paralyzed. When you don’t understand the mission properly you fail to make any headway. 

You get stuck between uncertainty and confusion. Weak vision costs you your mission.

A stronger vision outlays an immaculate programme. You have well laid out plans for your progress. You are ready with your mechanism for the challenges and threats you are going to face on the way. This shows your preparedness and readiness for the mission.

Your vision keeps you on track. No or vague visions are among the chief reasons small businesses fail.

Reasons small business fail-2

The target market is not well defined

reasons small business fail 3

Reasons small business fail is when you fail to know your niche. When your target market is not well defined then you don’t have a proper answer to these questions.

What is your target market?

Who is your target audience?

Why are you doing it?

You know that you are in big trouble if you have no answer to these questions.

Your target market is a well-defined consumer segment that you want to serve with the help of your organization. 

When you know your niche and target market then you are in a better position to reach the end-users of your product and services. 

You can prepare a campaign for them and mould your products and services to suit more to your consumers. 

The better you know your target market, the better you are in a position to excel in marketing and sales.

Reasons small businesses fail is because their target market and target consumer are not well defined.

When you don’t know who you have to serve, you start serving everyone. Small enterprises have a specific niche. Target everyone is like target no one. You would fail without niche clarity.

You would fail to strategize without the clear-cut perception of your niche.

Reasons small business fail-3 

No concrete business & marketing plan

reasons small business fail 4

When your vision is not clear and your target market is not well defined then you are in no position to make any plan for your enterprise.

When there is no plan then there is no action, when there is a lousy plan then there is a lousy action. 

Plans are strategies to meet the desired results. When we don’t have a proper strategy, marketing plan, financial plan, hiring, staffing, reporting, and organizing strategy then the enterprise would become a confused identity. 

The chances are very low that your enterprise will shine and grow.

Solid plans give us a roadmap to walk and progress. Plans give us an idea that where we are and where we have to go. They keep us on track and the enterprise never derails. It is incumbent upon us that we craft our plan meticulously.

The absence of a proper marketing plan means there is no marketing and sales strategy for the products and services. Then your products and services would never reach the target market and niche.

When they are not at the right place then they would never reach the right hands. The business would fail and not flourish. 

Reasons small business fail is poor marketing selling of products and services.

Selling of the products and services are the ultimate aim. When they are not selling, the business is not making any money. No profit means loss. Your business would shut down.

Such is the importance of business and marketing plan.

Reasons small business fail-4

Weak action and no evaluation of strategies

reasons small business fail 5

Action produces results. When you take actions it means that you want to progress in the desired area

Weak action means fewer results. Sometimes you get caught up in the process part so heavily that you always feel something missing and you never make a decision to take an action.

Again when you try to make a perfect plan and you always feel something lacking in your plan, then you delay your actions. Both are not acceptable. 

Anything which is stopping you from taking action is stopping you from making progress. So you must judge the situation and conclude to start making actions.

Every action is followed by a result. If you don’t like the result change the action. Making actions also allow you to change and adjust your plan with a better plan. 

When you don’t take action or weak in taking action then you miss adjustment, re-adjustment, and progress.

The reasons small business fail is slow learning. When you are not learning, then you won’t be able to evaluate. Without evaluation, you can’t judge the right and wrong for your business. 

Actions also allow you to evaluate your strategies. When you evaluate your strategies at regular intervals then you improve your policies, working styles, marketing strategies, consumer behaviour. You get an idea about the competitor’s strategy and you shift yours’ accordingly.

Your continuous evaluation and amendment make policies afresh and more result-oriented.

Reasons small business fail-5

No Customer followups and inconsistency in organization behaviour

reasons small business fail 6

When you are not following up with your customers, addressing their queries, replying to their requirements then they are not going to continue doing business with you. 

When you are not attending phone calls, replying to their mails, giving them proper after-sales services, then they are neither going to continue with you nor going to give you any referrals.

When you lose your existing client base, and no new referrals then your business is on the verge of collapse. 

Only your heavy follow-ups and adding new clients can save you. 

When you are consistent with your commitments then you are gritty and faithful to the marketplace.

Reasons small business fail is careless and inconsistent behaviour.

When you are consistent then you are also recognizable. Each day, commit yourself to take one action that will improve your visibility or reliability. You’ll be amazed at how quickly these little steps build into much larger successes.

Reasons small business fail-6

Capital crunch and no management coordination

reasons small business 2

Another major reason why small businesses fail is a lack of funding. When your business requires more funding for day to day expenses and other requirements and you don’t pour in then chances of the derailment of your organization is high. 

Similarly, the low level of coordination among staff members create a low level of trust and cohesion. That again hinders the full involvement of every person within the organization.

When this kind of environment runs for a long time then slowly and gradually your business erodes. 

The reasons small business fail is a few more.

Reasons small business fail-A few more reasons

  • Wrong selection of business
  • Your product and service price value
  • Overdependence only on a few customers
  • Overdependence on only 1 or 2 staff members
  • Poor location
  • Poor inventory management
  • More than enough investments on fixed assets.
  • Bad debts
  • Poor credits
  • Personal use of business fund by owner
  • Competition
  • Low sales
  • Unrealistic expectations from business

Reasons small businesses fail are different for different organizations. All major reasons are mentioned above to analyze and implement.





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