There are new businesses coming up everyday and companies going out of business each new day, even in the same industry and with the same type of business. This is how it has always been and the circle goes on. 

 

Several findings have shown that small businesses fail most and possibility of 8 out of 10 new establishments will fail within their first 10 years is very certain.

Why do small businesses now fail? and what makes a business successful? We’re going to be looking at the common reasons for online business failure.

 

Failure to plan properly: 

Online venture is no different to physical venture, in fact, it could be more challenging running an online business compared to physical business since competition is more and things change rapidly in which you’ve to react quickly, keep up with the latest trend and adapt fast.

 

Many small online business owners get motivated by results of other successful businesses without understanding the cost of fueling such enterprise, the market, the risk involved, the time taken to achieve the result and others.

 

Secret is an example. Secret is an app where people make short post about their experience anonymously, either it’s going to be true or not but when the management could not find a way of overcoming bullying on the platform, the CEO got it shut down.

 

From the statement of the CEO, David Byttow, it was obvious that he has not planned well how people can freely make their opinion known without revealing their identity and be disciplined enough to be just in their expressions and respect other people’s businesses.

 

 

Thinking online business is cheap

Using the search queries from Google and forum discussions related to starting online business as case study, most potential small businessmen and women who want to run business online from home don’t get prepared to make budgets.

 

More people are searching for how to start an online business without having money, getting free promotion, free resources and other things needed to make the business successful but unfortunately, most free things online still come with risks, even as simple as free email.

 

I’m not saying you can not do online business without spending money but you’ll have many tools to help you if you have budget and there will be more time to do many things rather than doing the whole work yourself.

 

Not having the Time to run your business

Communication is very vital in online business. If you can not respond to emails quickly, you’re going to lose many clients. Online users are always in rush in their dealings.

The way someone will wait for you while you’re out of office would not be the same when you don’t respond to chat or update your service.

 

Once you’re growing in business or you’ve other activities to attend to offline, there should be a replacement for you to take charge of your responsibilities.

 

Social channels are becoming the fastest medium to connect with your fans, potential clients and customers and if you’re not updating them from time to time, they will soon forget your business exist.

 

Doing too much than your capacity

It’s good to scale up if you’re already doing well in business. Opening more channels, launching new product or service, expanding your market reach are all good but most people do without the long term effects.

 

Do you understand the new market? Have you saved enough to fight the competition? Would you be able to manage all? among several other questions should be answered before replicating your business or creating new ones.

 

Another good example is when Endurance International Group (EIG) shut down e-Host after they acquired it to expand their market reach despite owning several other web hosting companies, including hostgator, Bluehost and ipage and couldn’t develop the brand to compete successfully in the domain and web hosting business.

 

 

Not Putting value first

Significant percentage of the businesses that fail don’t have standouts in their industry and it’s therefore very important to learn from the mistakes and failures of other business owners.

 

Profit should not come first in your planning but value. Almost every market is saturated, either in online business or offline. The ability to succeed is not in doing what others are doing but doing better than others in a unique way.

 

You may not have the financial muscle to compete with the leaders in your industry but you can be creative in branding your service in such a way that your clients would choose you first.

 

For example, you can ask your clients and potential clients to contact you on platforms like WhatsApp or Skype and keep in touch with them in any hour of the day.

You can even follow all your clients on social media as a small business owner and interact better with them than any big brand could be able to do.

 

Overspending

Some businesses are shut down just because the owner is extravagant in spending and not thinking much about the cash flow of the business. If your expenditure is on the increase, make sure you’re buying more assets much more than liabilities.

However, if you’re spending too much on things that would not bring value to the business, then revenue would seen dip and profit would take a shift from the green side to red over time.

 

Spending your profit outside the business is not good to the health of your business organization. You need to constantly reinvest your earnings and save for the periods you’d be having bad market.

 

 

There are several reasons why startups and established businesses fail and there are common causes to them all irrespective of the industry, their business and location. Some of the major causes are discussed and we hope to talk more on this topic.

 

 

 

 

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List of the Major Reasons why Small Businesses Fail

5 thoughts on “List of the Major Reasons why Small Businesses Fail

  • March 20, 2018 at 12:21 am
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    There are much to business success or failure but of you do your homework very well before starting a business, get the prospect for success and invest without worrying of getting your investment back in a short timeframe, you should get the desired result. Also know that, you’ll have to put much efforts that what you plan and expect lesser result than what you forecast.

    Reply
  • March 21, 2018 at 1:21 am
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    Incompetence and lack of knowledge before going into business can also lead to failure. Many go into businesses because of the bubbles and herd mentality

    Reply
  • March 21, 2018 at 1:11 pm
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    Not having enough budget will definitely kill businesses when tough time set in

    Reply
  • March 22, 2018 at 3:19 am
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    Most small business owners find it difficult to treat their business as big business owners do, not caring and sensitive to some little issues which can creep their business

    Reply
  • April 13, 2018 at 9:04 pm
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    I would also like you to talk about the signs of business that’s likely going to fail and when to back off when there’s road block to succeeding in a business

    Reply

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