10 Reasons Why Businesses Fail

While starting a business seems glamorous at best when you think about starting your own thing and when you encounter an unsustainable ‘sale boom’ that comes to prop up newly formed businesses in the hottest sectors, and you think thing’s will go on like this. In reality 70 percent of all businesses with employees fail within 10 years and these are some reasons why.


  1. Leadership Failure.

Your business could fail if you have poor management skills, which will showcase it’s self in numerous ways. You will struggle as a leader if you don’t have enough experience making management decisions, overseeing a staff, or the vision to lead your organization. Perhaps your leadership team is not in agreement on how the business should be run. You and your leaders may be arguing with each other publicly, or contradicting each other’s instructions to the staff. When problems requiring strong leadership occur, you may be reluctant to take charge and resolve the issues while your business continues to slip toward failure.

  1. Poor Financial Management

SmallBizTrends.com  states that 40% of small businesses make a profit, 30% come out even, and the remaining 30% lose money.

You have to know, down to the last penny, where the money in your business is coming from and where it’s going in order for your business to survive. Your business can also fail if you don’t have a contingency funding plan, money in reserve that you can call upon in case of a financial crisis. Some people start businesses with the dream of making money but they don’t possess the skill to manage cash flow, expenses, taxes, and other financial issues. Poor accounting practice will put a business on a path straight to failure.

  1. Failure to deliver real value.

Value is the heart of any business. The most successful businesses in the world deliver the most value. Full stop. You can find a way to under promise but over deliver. Always over deliver. No matter the circumstance. You will quickly find yourself at a dead end, if you’re looking for a fast buck or to get rich quick scheme. Focus on the real value proposition instead. You need to  restrategize, if you’re not adding as much value as your competitors.


  1. Failure to connect with the target audience.

Your business is going to fail if you can’t connect with your audience. An inability tocommunicate with your demographic means that you are unaware of your potential consumer’s wants and needs, and also oblivious to how you can help them best. The question you should ask are: What do they want? What they need? Who are they? What do they really want? Is it to invoke a certain emotion? To attain a certain status? How is your product or service going to help them solve their problems?

If you’re truly not addressing the consumer’s problems, then you probably don’t understand the consumer very much. And if that’s the case, then you have no business being in business until you do really do understand them. Use market surveys, focus groups, email ask-campaigns, or straight up phone calls, to connect with and understand your target audience better. Discover who they are right down to the smallest detail. That’s one of the way’s you will avoid business failure.

  1. Rapid Growth and Over-expansion

Sometimes a business startup grows faster than it can keep up with . You might open a website with a trending product and suddenly you are overwhelmed with orders you aren’t able to fill. Or maybe the opposite might occur. You are so convinced that your product is going to be over successful that you invest heavily and order way too much stock and now you can’t move it. These are both paths to business failure.

  1. Unprofitable Business Model.

Similar to failure in leadership, is building a business on a model that is not functional, starting without a business plan, and pursuing a business for which there is no proven revenue stream. The business idea may be good but the business is bound to fail if strategic guidelines aren’t put in place during the implementation of the idea.

  1. Unable to compete against market leaders.

Striving as a business is exponentially harder when competition is fierce and smaller businesses have targets on their backs, this is especially true in profitable markets where the stakes are high. If smaller businesses can’t compete against their larger counterparts, they need to find ways to adapt and stay in business. To do that takes a keen business sense and true courage.

  1. Failure to create the proper business systems.

Sales funnels aren not the only automation neede to run a successful business that’s built for the long term. Other proper business systems also need to be put in place. CRMs need to be implemented and customized. Policies need to be implemented. Financial audits and tracking procedures need to be created. And so on. Without a good deal of systems and automation, the amount of work becomes overwhelming and the details can easily be overlooked.

  1. Failure to optimize conversions.

Most entrepreneurs have so much that they need to deal with that they forget to address the absolute heart of any business. Without optimizing conversions, no matter what a business does, especially if it raises money and has a high burn rate, it’ll be futile trying to survive when the money runs dry. Resolve the conversions early on to ensure that there’s a positive return on investment on any ad spends. Then you know you have a thriving business.

  1. Lack of authenticity and transparency.

Businesses that lack transparency and authenticity will fail. Maybe not tomorrow or next week , but soon. Without seeing the customer’s needs, and a focus on the wrong things, businesses can easily lose the consumer’s trust. Rather than risk that from happening, focus on being transparent, authentic, and finding ways that you can give more rather than take. It’s a rare commodity in business, but one necessary if it’s going to survive for the long term.


If 50% of new businesses fail, then 50% of new businesses can succeed. Whether you desire to pursue a new business or you’re already running a business, you must realise that success depends on careful  planning and sound management that began before startup and continues throughout the life of the business.


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