5 Reasons Businesses Fail

Written by

Linda Prafke

Linda is a passionate educator, a highly sought-after business coach, and a Certified Management Consultant.

Businesses don't run on autopilot.

If you own a business, you know that it takes a lot of hard work, time, and discipline to make it run even relatively smoothly. In truth, it may take anywhere from two to five years before your business is performing well. It is important to set the right foundations, create the right habits, and avoid activities that can be detrimental to the growth and survival of your business.


When you’re running a business it’s easy to fall into a routine and forget about how even the smallest misstep can permanently damage your business. It’s equally damaging to overestimate your business’s ability to succeed in a short period of time. 

What are some common factors?

Although there are many more reasons why a business may experience decline or have to close its doors for good, we have identified five key factors that seem to come up time and time again. We’ve outlined them below with the hope that this will enable you to recognize and mitigate the effects of these common yet harmful practices.

1. Lack of Planning

A business without a plan is like a ship without a sail; it is destined to float along, guided by the current. Wouldn’t it be great if there was a document somewhere that specifically outlined a business’s goals and how to reach them?

Good news! That document does exist: it’s called a business plan, and it is an extremely valuable resource that serves as a blueprint for your business and what you envision for its future. It lays the foundation, outlines the plan for growth, and serves as a roadmap to success. With it in hand, you know exactly what you want for and from your business, the direction you want it to go in, and how to get there.


2. Poor Management

It’s a struggle to find the time and resources to juggle the many demands of a business while also trying to help it grow. Among other things, poorly-managed businesses have problems keeping track of and stocking inventory, are short on cash, have a hard time keeping staff, and create more than the usual number of dissatisfied customers. 

Additionally, the owner/operator will often feel overwhelmed and be unable to find a balance between business activities and personal activities such as spending time with family.

3. Poor Marketing Strategy

Even the greatest product cannot reach its full potential in the market if it is marketed poorly. Potential customers have a lot of options when choosing a product or service, and simply putting your product out there in the market does not automatically result in sales.

Education is an essential part of marketing. your potential customers need to know not only that your product(s) or service(s) are available, but they also need to be able to access them, afford them, and find use for them.


4. Under-financed

Poor estimations of start-up and operating costs can set you up for disaster. Sadly, this is a common mistake; entrepreneurs often think that they will generate income as soon as they start their business, but usually, sales are slower than anticipated during the first few months (or year) of operation.

For obvious reasons, it’s important to have enough funds available to you before you start a new business, as well as a backup plan with alternate and additional resources should something go awry.

In order to keep track of your business’s finances you should have already created a detailed budget and be able to adhere to it. We recommend getting the help of an experienced professional to draw your budget – mistakes are costly.


5. Lack of Motivation

It’s a well-known fact that most businesses do not see any significant profits during their first year. Great success doesn’t happen overnight, but understandably it’s hard to stay motivated by looking at your long-term business goals.

It’s easy to get caught up in it all, to get overwhelmed by all that needs to get done or even to become so excited about your vision for your business that you end up not doing much of anything. In each of these situations, it is important to take a step back and look at where your business is at currently, where you want it to go, and which SMART steps you need to take to get there.  Caution: goal setting comes with its own obstacles (read more about those here).

Share this!

Do you know someone who would benefit from reading this article? 

Share on facebook
Share on google
Share on twitter
Share on linkedin

Have you read these?

This website uses cookies to ensure you get the best experience on our website.