Reasons why small businesses fail


It can be hard to get an accurate temperature of the small business climate. Some experts will tell you that small businesses are doing quite well; while others will say small business owners are struggling. The inconsistencies of information being put out will make a person wonder if it is worth it at all to become a small business owner.

There are arguments about the tax code being unfair towards small businesses.

There are arguments about the economy being too slow for small businesses.

There are arguments about small businesses having a lack of resources and support.

While these arguments may be valid, they are not the end and be all that determines a business’s ability to perform within the marketplace. The ultimate determining factor that leads to a business’s success is the business owners ability to develop the strategic process which will produce successful results.

I say this because I have encountered many business owners who do not understand how to develop a profitable business. For one reason or another, they have missteps within their business operations which cause their business to lack sustainability. As these missteps go unchecked, they continually erode overtime, leading to a business which can’t avoid failure.

Let me identify the real reasons why small businesses fail.

1.No Strategic Outline in Place.
Many business owners get into business but have no guide of actions which are used to grow and sustain their business. This lack of planning is a recipe for disaster in the competitive business landscape. Without a solid structure, any disturbance can destroy the fragile standing of a poorly operated business.

A small business should have a working strategy in place which is followed by all within the organization. When a defined strategy is in effect and used by all; it makes it easier to identify what is working and what is not working. This gives the business the ability to be more efficient and effective with time, actions and capital; instead of wasting time on non-essential things.

2. No Culture of Excellence
There is a tendency for small businesses to slack off because their operation is small in scale. This thinking is the exact opposite of what makes a small business successful. Usually the big corporate businesses slack off as they grow in size and power, while the small businesses work hard to be recognized and grow.

A small business’s success is highly dependent on its ability to satisfy the customer’s needs and wants in order to retain their patronage. This means, daily interactions have to be underlined by a shared mindset of always providing high quality service with everyone who engages with the business.

3. No Target Market Identified
It is very bothersome when small business owners proclaim that any and everyone is there customer. No they are not! That is why the business fails to attract a loyal customer base, because their marketing (if any) and messaging are too broad.

In order for a small business to secure customers, it must know exactly who those customers are. Identifying this criteria allows for time and capital to be directed only towards those people who fit the preferred customer profile. This eliminates wasted efforts, which negate the business from gaining traction within the marketplace.

4. No Understanding of How to Generate Money
Not knowing how to generate money is shockingly very common among small businesses. It’s not that the product or service is bad, the problem is a lack of sales. No sales means no business.

Many business owners are afraid of selling and it leads to their eventual demise. Another competing business could have a product/ service of less quality but they are not afraid of the selling process in order to generate interest which can lead to revenue. Bottom line, sales is the lifeline of a business because it is what generates money to produce a healthy business.

A successful small business is hard enough to produce with so many other outside factors being a challenge. Don’t make the ability to become a successful small business impossible by having the internal issues which have been outlined. Take heed of these bad operational habits in order to ensure your small business avoids these costly mistakes.

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