8 Reasons Why Small Businesses Fail

Reasons Why Small Businesses FailThe saddest thing in the world to me is to drive down a main street in a small town and see “going out of business” or “for rent” signs in the windows of retail spaces. The last few years in business have been tough, but many of the business failures out there are largely preventable.  The thing I know about business, is that you must figure out what you don’t know about business to survive.  Here are the 8 most common reasons why small businesses fail.

1)     No clue about how hard it is to run a business- People start small businesses for many reasons. They hate their job, need some side money or always wanted to open a shoe store or cupcake shop. The trouble is that too many people do not take the time to really think about what their life would be like as an entrepreneur. It’s a tough lifestyle, at first. Think about what you want out of life first, and then build a business that supports your personal and professional goals.  Develop a life plan because you do not want to start a business that is NOT a good business for you.

2)     No network- “Your network is your net worth.”  You must spend time cultivating the market to develop and nurture your professional and personal connections. Your first customers will come from your personal network. If you have no network, your business will not be able to survive.

3)     Not saving enough money- If you don’t save enough money before you start your business, you may not be able to hang in there until the business can generate any real revenue. People with assets have options. It takes on average 12-18 months to break even in a new business, let alone replace your corporate salary.

4)     Lack of a niche focus- Too many small business owners sell to anyone they think has money. Take the time to develop a well-defined niche for your business. It is so much easier to develop a marketing plan when you are clear on your target. By the way, specialists can always charge more money.

5)     No marketing plan- Too many small business live off referrals, which is good, but that eventually will dry up. You must put some effort each day into generating sales for your small business. You can make a call, send an email, write a blog post, and ask for a testimonial on LinkedIn from a happy new client. Do not rest on your reputation. Actively let the world know you are open for business.

6)    Not managing your brand online- It’s now easier than ever to build a brand online. It’s also just as easy to damage your business brand. Do you have a good, helpful website? Do you Google yourself and your business monthly? Do your social media accounts tell people how to hire you? Do you have a blog that hasn’t been updated in six months to a year? Do you have bad reviews online that you have not responded to? Can your website be seen easily from a mobile device? People will search for your company online before they ever call you, what would they find about your business today?

7)    Not communicating with existing customers- It’s cheaper to keep a customer than to go out and get a new one. You must have a database, CRM system and email marketing program to communicate with your customers so that they know all the ways they can work with you. At least monthly, your customers should hear from you.

8)    Lack of fiscal discipline- If you do not run your household with a budget, you won’t run your business with one.  You must make business decisions based on up-to-date financial information. Know your latest numbers by the 15th of every month. Ask yourself “Why” three times before making a purchasing decision for your business.

Do you have any other reasons why small businesses fail?

“Failed Stamp Showing Reject” image courtesy of Stuart Miles / www.FreeDigitalPhotos.net

Melinda F. Emerson, SmallBizLady, is America’s #1 small business expert. She is an author, speaker and small business coach whose areas of expertise include small business start-up, business development and social media marketing. She writes a weekly column for the New York Times, publishes a resource blog, www.succeedasyourownboss.com which is syndicated through the Huffington Post. She also hosts a weekly talk show on Twitter called #Smallbizchat for small business owners. As a brand, she reaches 1.5 million entrepreneurs a week on the internet. As CEO of Quintessence Multimedia, Melinda develops audio, video and written content to fulfill her mission to end small business failure. Forbes Magazine named Melinda Emerson one of the #1 Woman for Entrepreneurs to follow on Twitter. Melinda has been featured on MSNBC, Fox News, NBC Nightly News, and in Fortune, The Washington Post, USA Today, Wall Street Journal and Black Enterprise. She is the bestselling author of “Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works,” and the ebook How to Become a Social Media Ninja; 101 Ways to Dominate Your Competition Online.


  1. says

    All very true. Another reason is lack of discipline. Some small business owners think that because they own the business, they can get there anytime they want. Which is so wrong. If it was paid employment ,would you get to work anytime you want?

    • says

      Hello! I enjoyed what I read and agree! This is my business that I have but want your opinion. I do this for a living I’m excited about it and ask that You check it out and reply back to me honestly! If you like what You see and hear LOL pass it on people laughed at me when I told them I was texting famous people they said they want never text you back! But it didn’t deture me! Determined to win big!!! This my site http://WWW.kevinandsheliatravel.dreamtripslife.com Thanks in Advance

  2. says

    Very actionable steps here! I recently set up Freshbooks and it’s a life saver. Xero is another great option, but was harder for me to complete.

    Freshbooks has easy reports to show you exactly where money is going and you can even bill up to three clients for free. It’s a great option for smaller or solo business owners just getting started.

  3. Saniah Johnson says

    Great insights into why businesses fail! I would add to your list, failing to invest in resources when needed. No one expects you to be capable of doing everything. Know when to hire qualifed professionals to assist you with that great marketing plan, financials, or other skills to help your business grow.

  4. says

    Another reason businesses fail is the greed mentality. Many open businesses thinking they will ‘hammer or hit’ the millions sooner. They do not realize that it takes your BLOOD to make the millions. In short, been in business is HARDWORK!

  5. says

    Hello there! I know this is kinda off topic however , I’d figured I’d ask.
    Would you be interested in trading links or maybe guest writing a blog article or vice-versa?
    My website addresses a lot of the same topics as yours and I feel we could greatly benefit from each other.
    If you’re interested feel free to send me an email. I look forward to hearing from you! Superb blog by the way!


  1. […] I was recently talking to someone who is a successful home-business owner and who told me that when he began his first home business, he had neglected to put in the time and effort to develop a solid business plan for his new start-up. He did, however, toss together a rather shoddy one that he put almost no thought or effort into simply because his bank, from which he was attempting to acquire a business loan, requested one from him before they’d even consider approving his loan. He informed me that it had been a waste of time anyway, as, the bank ended up refusing the loan. He did manage to borrow some money needed from independent investors and go ahead with putting his new home business into practice, but it ended up failing within two years of start-up. […]

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>