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Top reasons why businesses fail and how to overcome failure

Julianne Leybag
27 August 2017 3 minute readShare
Business failure

Entrepreneurs know that failure is an inevitable part in any kind of business—but with proper planning, it doesn’t have to. Read on as My Business discusses the top reasons why businesses fail and the possible solutions to small business failure.

Business failure is probably the last thing on the minds of business owners, especially with fledgling entrepreneurs. However as a majority of startup businesses experience business failure within their first year of operations, it is best to discuss the reasons for business failure and devise prevention strategies as part of the business strategy.

The main causes of business failure and their remedies are, as follows:

  • Poor business management
  • Starting a business for the wrong reasons
  • Faulty business planning
  • Failing to go digital

Poor business management

For the most part, a reason why small businesses succeed and why others fail lies in the implementation of an effective business management—a must for small and startup businesses. It’s often pretty easy to see the connection between poor business management and business failure.

Newly-minted business owners usually don’t have the management skills needed for a business to succeed. This skills can be anything from finance, production, employee hiring and management and marketing.


A business concept can only go so far: it is management that helps deliver that concept to market, and as such must also be considered if the business aims to become sustainable and last in the industry.

So how would a business owner know the various steps on how to avoid business failure? Either by educating themselves on all of the necessary skills, simply hire experts in those fields they are lacking skills in and/or outsource most of the work to seasoned professionals.

Starting a business for the wrong reasons

Different business owners have different reasons for starting a business. While some see this as trivial compared to other business aspects that are listed in this article, having the right reasons for starting a business is very important as this could make or break the business in general.

If a business owner starts a company thinking it could be an avenue for easy money and allow them to spend more time with their family, it’s safe to say that these considerations are not the right reasons for starting a business. Granted, it can definitely be achieved in the long run—but using these reasons as the driving force behind a growing business could actually lead the business to fail.



Some of the right reasons and motivations to get started on a business are being passionate about the concept of your business, being unfazed by failure, getting along with all kinds of people and thriving on independence.

Faulty business planning

Seasoned business owners know that having a careful and strategic business planning strategy is imperative to the success of any business. Most have put a lot of effort and strategy into developing a business plan before anything else precisely for this reason.

Small businesses are known to fail simply because of their tendency to misfocus their business plan, or not have a plan at all. Creating a business plan may seem like easy work, but it must be able to cover all bases relevant to the business.

An ideal business plan usually contains an updated SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis, process outlines, current information on factors surrounding the business, audience socio-demographics and market analysis, employee management and requirements, contingency plans, marketing plans and budgeting and financial outlines.

Not only would having these items help the business as it grows, it would also make things easier in the future if the business decides to get a business loan. Most banks and lenders require a business plan before a business loan gets approved.

Failing to go digital

For businesses to thrive in the digital age, not having an online presence can be disastrous—the business misses out on a huge potential market that could boost  growth.

Creating a business website and social media accounts are usually the way to go for small businesses to boost their profile and visibility online. Business owners can also use these as avenues for business sales by setting up an ecommerce option for customers.

Creating and cultivating an online presence not only helps businesses connect with their audiences, it also makes marketing and sales easier as it also boosts the authenticity of the business. Digital platforms can also open up new opportunities—potential investors could encounter the business via online platforms are decide to invest in your business.

Top reasons why businesses fail and how to overcome failure
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Julianne Leybag

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