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Your Small Business Is Likely to Fail and It’s Your Fault

Written by on July 11, 2016

Did you know that you have only a 10% chance of succeeding in your business? Well, you should if you’re planning to establish a business of your own of any size.

According to Fortune, 9 out of 10 startups fail. And guess what’s the percentage of small business failure?

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The U.S. Small Business Administration states that only around 70% of small businesses will be able to survive their first two years, dropping to a 56% chance to be alive in a 5-year perspective. It’s actually quite unsettling if you ask me.

Running business means you always have a risk to fail.
Running a business means you always have a risk of failure.

Of course, we can argue about the methods behind the statistics and the definitions of ‘failure’ and ‘closure’. But we can all agree that the chance of not succeeding is huge, which really worries me.

Honestly, do I really want to spend all that time, money and effort to be out of the business in half a decade?

Not really. So I decided to dig deeper into the topic and do a little bit of a research on why some small business live and grow, and why others burn to ashes.

After reading and analyzing what can go wrong and how to avoid it, I ran into some statistics that shocked me and made everything very clear.

Do a research before starting a new business, large or small!
Do research before starting a new business, large or small.

According to research from the University of Tennessee, 46% of business failures are due to incompetence, and 30% are due to unbalanced experience or lack of managerial experience.

So, basically, businesses fail because of the owners. And it’s not someone else’s fault, like strong competition or crises (which cause only 12% of the total number of failures).

The owners themselves do the initial and consecutive wrongs, helping businesses go down the pipe. It means that no matter how good your idea is, and how well you can sell it, if you’re wrong at any stage (business planning, promoting, establishing, etc.), one mistake will lead to another, and you’ll fail.

Check your skills first - not everyone can be a business owner!
Check your skills first – not everyone can be a business owner.

So before starting to look for any other causes, you should begin with yourself.

Put all your previous judgments aside, and forget your family’s reassurances that you’re the best and can do anything in the world.

The absence of personal skills, business product or service issues, inadequate business planning (or the lack thereof), ineffective marketing and failure to track finances are probably the most common reasons that lead small businesses to fail.

Take a look at the most common mistakes small business owners make — and make sure you avoid them to keep your small business afloat.

You Don’t Have the Personal Skills To Be A Business Owner

Have you ever considered whether you’ve got enough personal skills to run a business and to be the owner?

Some personal skills are the must!
Some personal skills are a must.

You must have at least the following personal skills to become a successful entrepreneur:

  • strategic thinking and planning
  • leadership
  • people management skills
  • financial literacy

Without these, your business will probably suffer for a long time and then fail.

No One Needs Your Products or Services, or They’re Not Good Enough

It seems obvious that your product or service should be valuable, and customers must have a real need for them.

The quality of the services provided by your small business should also be at least on the same level with the other players in you market.

Nonetheless, a lot of businesses still fail because of the reason mentioned above. Make sure you’ll be able to fulfill your customers’ needs and expectations before going into business, not after.

Your product or service must be relevant to the customer.
Your product or service must be relevant to the customer.

Your Business Planning Is Bad

Correct planning is essential to your small business. As you’re the owner of the business, try to think of the future and the challenges you’ll face, set goals and deadlines, and then work on achieving them.

This document should also have a description of your business concept, mission and philosophy. The lack of an effective business plan will kill your business before you ever get it off the ground.

A well-thought-out business plan also forces you to think about your marketing and management plans, competitors, target audience, potential problems and solutions, financial needs, and overall strategy to reach all of your objectives.

Plan your targets and set deadlines to succeed!
Plan your targets and set deadlines to ensure your success.

Your Marketing Is Ineffective

Ineffective marketing is a common mistake, and it’s most likely to be made at the stage of the business planning process, followed by an incorrect marketing strategy.

Despite the growth of digital marketing services (and especially SEO and social media marketing), many small business owners prefer the old-fashioned marketing model and approach: print, TV and radio ads, focusing very little (or not at all) on the online environment.

Make sure you use digital marketing in your marketing mix!
Make sure you use digital marketing in your marketing mix!

You might think that your flyers are attractive enough to get your prospective customers interested in your business. But not having a website and or a strong online presence will make them back away and go to one of your competitors instead.

Don’t rely on offline marketing alone to get more customers and revenue; create a website and consider these points of digital marketing for your company to help your customers find you and make them happy.

Even better, check out our full guide on How to Boost Your SME & Freelance Social Media Presence for more great tips.

You Underestimate Your Competition

Small business owners tend to underestimate their competition, although customer loyalty doesn’t just happen if you don’t try to earn it. Yet many small business owners mistakenly think it happens magically.

Even if your product is better than your competitors’, don’t forget that many of them might have been in the business for a longer time than you, and they have already established a strong and loyal customer base.

No matter what, always keep an eye on your competition!
No matter what, always keep an eye on your competition!

Proper marketing, as well as a solid web presence, will help your business stay competitive while getting more potential customers interested in your products and services. If you don’t care about your customers, your competitors happily will.

You Don’t Keep Track Of Your Finances

Failing to keep track of finances is the most common reason why so many small businesses are taking on too much debt and go down.

If you don’t keep careful records of all the money that comes in and goes out of the business or pay very strict attention to your finances, you risk getting into debt as well.

Never lose track of your finances and plan accordingly!
Never lose track of your finances and plan accordingly.

Moreover, keeping track of finances allows you to determine which clients are paying on time and which aren’t and to get accurate financial reports that will give you a better insight on your return on investment and profits.

Online invoicing software can help you track and analyze the financial status of your business.


  • your small business has an almost 50/50 chance of surviving more than 5 years
  • the main reasons of business failures are managerial: incompetence and a lack of experience
  • in order to stop your business from failing, you should at first check your managerial skills: can you become a business owner at all?
  • make sure that your products or services are needed and are exactly what your customers expect
  • create a business plan, which will include your strategic goals, plans, challenges and other necessary points
  • if you’re not online, most likely you don’t exist at all – don’t concentrate only on the offline activities, invest in your digital presence too
  • analyze your competition and fight hard to beat them
  • whatever you do, plan your finances and keep them in order

Success is a combination of factors that must be carefully thought out from the very beginning, otherwise your small business will unavoidably result in failure.

Do you have any success or failure stories that you’d like to share? Comment below and let others learn from your experience!

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