Why Do Small Businesses Fail?

Darryl Bachmeier
Mar 27, 2019

Running a small business can be difficult and no one wants to fail but many do. New companies have the highest failure rate of all. In fact less than 60% of new business make it past the first two years.

What Reasons Do Small Businesses Fail?

Poor Planning

You need to come up and write down your strategic plan. You need to analyze your competition, forecast sales and plan for a changing environment.

Not Enough Capital

If you do not have enough cash flow to keep the business operating then you will run into trouble. Small business owners take on lots of personal debt using their credit cards to run the business. Cash is the lifeblood of a business.

Ineffective Marketing

You always have to be marketing your business. If you are not promoting you will fail to reach new customers and maintain a good reputation. Look at multiple channels of marketing.

Poor Leadership

Having the necessary skills to inspire and empower your employees is essential. You need to make sure morale stays high and employees remain productive.

Growing Too Fast

Success is good but you must be careful not to spread resources too thin. Trying to go too fast can cause cash flow issues and can even lead to bankruptcy.

No Value to Customer

You must show that your product or service offers something unique or of value to customers. How easy is it for your customer to substitute your brand with your competitors? Is your message clear what you are offering?

Out of Touch with Customers

Do you communicate with your customers? Do you accept and respond to feedback? Do you take their feedback and turn it into action?

Bad Location

Location is important especially in a retail establishment. If your customers cannot find your door how do you expect them to buy anything? If you are too far from your target market why would they travel to you instead of going to your competitor.

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