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Four common reasons small businesses fail


Businesses are established year in and year out; however, research shows that 20% of small businesses fail after just one year, and 50% fail by the fifth year. We can find several Instagram online stores that have been changed to three different businesses in short periods, from a hair vendor to a jewelry store and then a perfume brand. These small businesses come and go like the wind before anyone even notices. Why are they unsustainable? Why do they fail?


We have established that entrepreneurship is risk inherent, and each business has its unique problems and shortcomings, but at the root of it all, we have found these four common reasons small businesses fail. To beat the statistics, it is necessary to understand what can lead to business failure, manage it properly or avoid it entirely. Give your small business a fighting chance.


Some reasons why small businesses fail are:

  • Inadequate Leadership

A business's success depends on its leadership and management, likewise its failure. It all begins from the very top of the business, especially a small business which relies heavily on leadership. A small business owner is likely to be the manager and operations officer of the business. Where s/he does not have adequate expertise or knowledge on how to run a business, the business would suffer. A small business needs to have proper guidance in its operations because that would, in turn, affect every aspect of the business. As a business owner, you are responsible for your employees, vendors, and customers – you need to set a clear and consistent vision for your team as they look to you as a representation of the business.

  • Poor Business Planning

Small businesses tend to start operations without a proper, well-developed business plan. It is easy to think all you need is to have products and start selling to be a business, but that is hardly sustainable. A business plan is a crucial element for a small business. It is of absolute importance to draft and define a solid business plan as that would aid in almost all aspects of your business. A good business plan would detail all the goals your business seeks to achieve, future problems that may occur, and their solutions. It serves as a strategic guideline throughout your small business journey. The key is to follow your business plan and stick to it while also being flexible to regularly review it as necessary. Making massive changes to your business based on quick observations without consulting your business plan is a quick way to business failure.

  • Mismanagement of Finances

A business aims to make a profit, right? On the way to achieving that aim, the company would have to spend money. Financing is a huge aspect of business that cannot be overemphasized, and quite similarly, lack of and mismanagement of funds is a significant reason why small businesses fail. As a business owner, you have to consider your working capital, cash flow, debts, and profit. It is easy to let the ball drop on any of these aspects, but they are vital in ensuring the continuity of your business. A business cannot begin without adequate capital to kickstart the process, cannot be sustained without enough cash flow to keep operations running, cannot grow with too many debts hanging on and cannot be a viable business without making profits. Small businesses should outsource their financial management to consultants or hire more experienced hands.

  • Ineffective Marketing

What's a business without customers? Not a business or, more appropriately, a failing business. Effective marketing gives your business the visibility to grow and attract customers. It is important to know your target audience and how to reach them. Marketing works when you reach not just people, but the right people who need what your business offers. As an early-stage business, you need to invest in marketing to build trust and engagement with potential customers. Take advantage of digital marketing, create an online presence for your business and build a base of loyal customers. Businesses that do not understand the need for sound marketing strategies are likely to face challenges in sales conversion which can ultimately lead to business failure.


Starting a business can be overwhelming, but it does not have to be; you can have a successful business that keeps growing. It is advisable for new and small businesses to take advantage of business consulting services to help run a business. At BizPartner, we offer advisory services for every aspect of your business. We are available to answer any inquiries at www.bizpartnerng.com. Visit today and have a chat with us.


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