The Top 10 Reasons Small Businesses Fail

There are numerous reasons why small businesses fail. In fact, according to statistics, in 2025, 44% of struggling businesses were willing to change their strategy to improve. This included a 26% jump from 2024, which offers kudos to UK SMEs, who are prepared to be proactive and adapt to stay afloat.

As we reach the end of 2025, there’s some good news. This year, UK businesses experienced a slightly more stable environment. And the fastest growing sectors in the country include niche online retail businesses, especially those in the pet care, wellness and sustainability sectors.

It’s interesting to note how businesses are currently staying afloat. The British Business Bank (BBB) suggests that using overdrafts and bank loans has decreased from 50% towards the end of 2023 to 43% a year later. It seems that SMEs weren’t keen to take on new debt, because of the costs involved.

According to statistics from BBB, UK businesses are facing undeniable challenges, but their resilience is helping many through the current economic slump. However, there are still many that have failed. According to business magazines like Forbes, one in every five doesn’t make it. But there’s also good news – four do.

We’re going to help you be one of those four businesses that succeeds. Here’s how… 

The Top 10 Reasons Why Small Businesses Fail

Globally, small entrepreneurs have difficulty succeeding. But you don’t need to fail if you know what you need to do to succeed. Sure, you’re facing plenty of uncertainty as you head out on your new venture. But you don’t have to face it with trepidation. A positive attitude can help towards success. Knowing how to succeed is also important.

If you follow our guide here on the top 10 reasons why small businesses fail, we’ll find a pattern of behaviour that you should avoid. If you have this data at your fingertips, you’re halfway on the road to success. Just be aware of the mistakes new small businesses make, and ensure you don’t follow their lead. 

Let’s discuss the top 10 reasons why so many little businesses fail, and the ways you can ensure your business isn’t one of them…

1. Not Looking at the Bigger Picture

If you don't have a clear idea of what you're trying to achieve as a small business, you'll never succeed. Use your vision and your purpose to lead you. That, together with your intuition is your guide to what you want to achieve going forward. This forms a basic business plan that outlines where you're going and how you intend to get there. Without a clear long term business plan of what your company is going to do, you can't achieve success.

List in detail exactly what your business operations involve. Work out what sets them apart from others, and consider the services that you will offer. Paint a clear picture of who your customers are, who your suppliers are, and who your competitors are. 

And dare to be the different one, the one whose performance is exemplary. Without a clear plan of action, you can't turn your dreams into reality.

2. No Market for Your Offering

Have you done your homework? Have you researched every single aspect of your business to the extent for an idea of how successful it's likely to be? Is there a market for what you're offering? How will it be received? 

Is it the right time to offer what you specialise in? If there is no particular need for your product or service, you can spend a fortune trying to make it succeed, but you won't.

Sure, you'll find many companies that offer the same or similar services, and they do reasonably well. But, if you want to stand out from the crowd, you have to offer something unique or create a service or product that is a cut above the rest. 

Niche markets are the way forward. Find your niche, specialise in it and offer it to the market. That's the way to succeed.

Part of succeeding is being able to predict 'the next big thing'. You need to understand how people behave, what they want and how you can give it to them. You must understand the causes of human behaviour to the extent that you know instinctively what your audience will need next. This way, you can give it to them. 

You must be willing to offer something new and exciting just as your audience realises they need it. Those are the tools you need to succeed.

3. Insufficient Start-Up Costs

It’s important to do all your sums beforehand so that you have the working capital to start your business. Running a small business involves knowing that you have enough cash flow to stay ahead. 

To get enough capital, you can take out a business loan. Numerous loans are available to assist small entrepreneurs. You can also request finance to purchase equipment. The government alsooffers certain companies financial support. So do your research.

It’s a good idea to find out exactly how much capital you would need to have in your bank account to keep your business going until it’s on its feet. Financial specialists will help you work out your business goals. Firstly, set up payment terms with suppliers. If you do this, it will help you meet your financial commitments. You need to have an idea of how much cash you will be paying out, and how much money your company will eventually accrue as profit. 

4. Not Hiring the Right People for the Job

Human resources is a specialist field, and when starting a business, hiring and retaining good staff is essential. Hiring friends and family members often isn’t a good idea for small business owners.

You need the knowledge so you can hire the right people to do the job for you, to create a work culture that makes people enjoy what they’re doing and offer you their best. Make a point of hiring people to do the work for you who are like-minded, with the same values and work ethic as you have. Hire the best, and you wll be rewarded.

5. Not Researching Your Products Properly

If you don’t do the homework before starting a business, you have far less chance of success. You must research every aspect of your products or services to ensure they will work, that you know who your market is, and how they will receive these products or services. If you’re not offering something that people want, you cannot succeed.

If the product is difficult to use, seasonal, or risky, there’s little chance of success. So ensure you research every single aspect of your business model. Identify whether the specific product or service is something that people are willing to pay for. And iron out any problems before they arise.

6. Not Marketing the Business Correctly

You can’t start a business and expect it to succeed without having a proper marketing and promotions plan in place. Nobody is going to buy your product or service if they don’t know about it. Ensure you have customers ready to buy, and to do that, you need to implement a good sales and marketing strategy with all the relevant information. 

There are several different ways to market a product or service, so find out what would work best for your business. 

Research how to attract customers and keep them. To do this, try a mix of adverts, direct emails, posters, flyers and other marketing methods that will drive sales and make your company known. These should include a media privacy policy. 

You should design and set up a website, create social media accounts, where you post to keep customers interested, and have digital marketing strategies. If you reach your target market, you have a far better chance of success and sales. A poorly managed business won’t succeed, no matter how hard you try.

7. Not Looking After Your Customers & Suppliers

Marketing (as we mentioned earlier) is the way to communicate with your potential audience. And if you don’t have a way of communicating with them, you won’t have a business. You have to be aware of how to look after your customers and communicate with them so that they feel part of your ‘family’. Building a relationship with them is the only way to find out what they want from your business service or product.

You also need to build up a good relationship with your suppliers to ensure they are with you every step of the way when it comes to looking after your audience. Customers and suppliers need regular feedback, so always keep them in the loop about how your business is operating. No privacy required here, just honesty. 

Be professional. |Constantly return phone calls or emails from your customer base and your suppliers. Keep day-to-day communication open at all times. Follow up. Keep those relationships on an even keel. Be professional at all times. The more you communicate with them, the more likely they are to communicate with you. 

Poor customer service is often the first thing to sour a business relationship. It's also the first step towards businesses that fail. So find a solution to these problems before they occur.

8. Your Business Service or Product Isn’t Timeous

Timing is everything. If you open a business at the wrong time, it’s doomed from the start. Research is just as important, as is listening to what your prospective customer wants. This is what can make your business successful.

One of the best ways to find out whether you’re offering people what they want is through customer information or feedback. This is important to ensure you proide your audience with exactly what they want, and at the right time.

9. Not Noticing Your Competitors

Many entrepreneurs don’t know what their competitors are doing, and this can be really bad if you’re running a business. It’s crucial you know what your competitors are doing so that you can always keep one step ahead. If you don’t do this, you’ll lose out.  We’re not suggesting you need to be obsessive about your competitors, but you must keep an eye on them.

You need to be able to explain to your audience why what you offer is better and more valuable than what competitors are offering. And if you do find that their offering is more valuable than yours, up the ante to ensure you offer the very best. Or pivot to greener pastures. It’s the only way to stay ahead of the pack.

10. Not Being Willing to Learn

Never feel so sure of yourself that you aren't prepared to learn something from what others are doing. If you are over-confident in your abilities, you won't succeed. Be willing to learn from every single situation you find yourself in,

Take cues from competitors, and from your own team. You can all learn something new every day, so be open to this. The more keen you are to learn, the more you're likely to succeed.

As nothing ever stays the same, be open to change, to new ideas and new perspectives. It's the only way to stay ahead of the game.

Now you know the top 10 reasons why small businesses fail. maakeAcademy has a series of fascinating blogs that you can read to help your small design-led business.

We Can Help maake Your Business Grow

We want to help you discover your business strength. One of our key focuses is to show other small businesses how to improve their sales and marketing strategies. To do this, you need to be able to identify and benchmark your business’ current performance. 

maakeAcademy has devised a questionnaire to help you improve your performance in Sales and Marketing while optimising your operations.

Take our 3-minute questionnaire and discover how to take your business to the next level.

Watch out for more innovative methods and an online course to make your small business grow! 

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