Reasons small business fail

Reasons small business fail

There are a wide variety of reasons for small businesses failing with some being wholly unavoidable such as personal circumstances dictating a change of direction.  However, some reasons are more common than others.  Have a read of these common reasons and do your best to make sure you avoid them.


Common reasons small business fail

Below are some of the most common reasons that small businesses fail.  Make sure you take action to avoid these pitfalls.

Lack of planning

If you want to run a successful business, you really need to some planning.  You need to find out what the start up costs will be, where you will get the money from to run the business, what resources you need, how to plan your time and many other things.

So before going any further, go complete a simple business plan.  This will help you think about those areas of business that you may not have otherwise thought of.

Not understanding the market

Part of a business plan as mentioned above is carrying out market research.  So many small business owners plough ahead with their latest idea without getting up to date research about what is happening in the market place.  Go find out the latest industry news, all about the competition but more importantly, all about your target market and what they want.

Poor marketing

Marketing should be planned, aimed at a specific audience, portray the right message and be measured.  If you miss any of these points out you are lessening your chances of it being successful.

You know all about what you are selling and why, but unless telepathy is your strong point, your perfect client’s wont.  Find out where they are and get your clear, easy to understand message as to what you are offering and why they should buy from you under their noses.

Running out of money

Do you know how much money you need to bring in each month so that you can cover the bills, taxes, insurances and all other expenses to keep your business alive?  If you don’t, I suggest you go find out now. And then check how you estimated income and expenses compare to the reality on at least a monthly basis.

Failing to keep up to date with the finances and running out of cash is a killer for any business.  As they say, cash is king!  Treat it as such.  Get to grips with the basics of cash flow, profit and loss and break even points so understand the financial health of your business and can put plans in place to deal with any problems.

Not complying with legal issues

Find out what legal implications there are within your business so that you don’t fall foul of the law and end up in hot water.

This includes:

  • Health and safety
  • Local trading licences
  • Encroaching on other businesses names, trademarks or intellectual property rights
  • Informing the relevant people or authorities
  • Planning permission
  • Business rates
  • Hazardous substances compliance
  • Fire Safety
  • Health and Hygiene certification
  • Data protection

Do your research and find out what applies to your business.

Lack of insurance

Every small business will need insurance of one kind or another so don’t ignore this and then end up with either a claim against you that you have to settle personally, or without a vehicle or stock and no funds to replace.

Typical Insurances to consider in a small business are:

  • Public liability
  • Professional indemnity
  • Product liability
  • Employers liability
  • Motor insurance
  • Buildings and content
  • Business equipment

Staffing problems

If you are going to employ staff in your small business you need to take on the role of manager, leader and effective communicator.  Once you have found the right staff, you need to make sure you look after them and give them the best chance of helping you turn your business into a success.

Get yourself up to speed with employment law to ensure you comply with current legislation but also make sure you provide the right training and support so that your staff can do their jobs effectively.

Ignoring advice

It is rare to find a small business owner who knows everything and can do everything on their own.  Taking advice from someone with the experience and professional knowledge can help give your business the best chance of success, so don’t ignore it.

Find someone to turn to for advice when you need it, whether within a networking group or a personal mentor.  They will have been there and done it before you and will help you avoid those all too common pitfalls and mistakes.

Emotional burnout

Emotional burn out tends to happen when that critical work/life balance is lost.  The long hours of all work and no play end up taking their toll.

Be aware of how you are feeling and give yourself a break every now and again.  Take time to sit back and reflect and don’t neglect time with friends and family.


Running a business can be stressful, but ultimately it should give you joy so don’t lose sight of that.  If you would like more in depth information on reasons small business fail and how to avoid these mistakes, become a member of The Small Business Kit today.