Blog

6 Reasons Small Businesses Fail

Small businesses fail for various reasons, and it’s often a combination of factors rather than a single cause. Here are some common reasons why small businesses fail:

1. Lack of Management Systems
2. Lack of Vision and Purpose by Principles
3. Lack of Financial Planning and Review
4. Poor Market Segmentation or Strategy
5. Competition or Lack of Market Knowledge
6. Inadequate Capitalization/Under-Funded

Lack of Management Systems

Most entrepreneurs have no systematic way of generating information or determining what is and is not working. Also, there is little or no effort to convert data into usable information.

Lack of Vision and Purpose by Principles

Entrepreneurs need to view their business as a means to an end. Bill Gates, for example, has become successful because his purpose was to put a computer in every home and his business was a way to achieve that goal–not vice versa.

Lack of Financial Planning and Review

Most self-employed people concentrate primarily on generating income when they should be most concerned with building equity.

Poor Market Segmentation or Strategy

Most entrepreneurs don’t know who their customers are. Factors such as customer age, geographic location, and family size can have an impact on what and how they buy.

Competition or Lack of Market Knowledge

The self-employed are often so engrossed in the daily task of running a business that the last thing they think about is what their competition is doing and how they can do it better.

Inadequate Capitalization/Under-Funded

Although this factor commonly rates as the primary reason for business failure, it is actually a symptom of underlying problems.

FAQs Section