Why Small Businesses Fail

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Each and every day, there are an alarming number of small businesses that cease to exist. Why do small businesses fail? Well, the fact is, that according to research, around half of all small businesses that begin doing business in any given year will shut down within two years of starting out. Some of the reasons small businesses fail have to do with economic pauses or even just dumb luck, but most of the time when a business fails it is because the business or the business owner has made some sort of mistake or even a series of significant mistakes.

Here are some of the most common reasons small businesses fail.

  1. Insufficient planning. In many cases, a business owner may not spend the amount of time he ought to spend in order to plan before he opens his business. If he is going to be successful in a small business, he has to be able to look down the road at the long term prospects involved in his business.
  2. Insufficient business skills. Just because someone is good at what it is that she does, doesn’t mean she has a good head for business. If she is going to be successful in her endeavors, she has to learn things about bookkeeping, inventory and all sorts of business principles that may not have anything to do with what her actual business is.
  3. Bad marketing. It isn’t enough to have an excellent service or an amazing product. You have to be able to let people know about your product or service. You have to be able to tell people why they need to buy your product or to hire you. If you have poor marketing, you are not going to succeed in your small business.
  4. Insufficient money. It takes time for a small business to turn a profit. Someone can’t open a business one day and expect to be turning a profit in a matter of just a few days. If the small business owner thinks that he is going to become profitable in just a few days, a few weeks or even a few months, he probably has a lot to learn about small business.
  5. Staffing problems. If a small business is going to survive, it is eventually going to have to hire somebody beyond the person that is starting the business. Choosing the right people to hire and knowing how many people to hire and to do what jobs is an important part to small businesses success.
  6. Inability to retain customers. Repeat business is the lifeblood of any successful small business. You can almost guarantee that a small business will fail if it does not have customers coming back more than once. For a business to succeed, you have to be able to get customers through the door more than just one time.
  • While these aren’t the only reasons a small business fails, they are some of the most common things that can cause a small business to fail.
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