The 10 reasons why small businesses fail – and how to avoid themMay 13, 2023
It’s sad, but very true – many small UK businesses are destined to fail, according to statistics. In fact, those 2022 stats show that one in 5 small businesses fail in the UK each year.
OK, so one in every 5 businesses don’t work out, according to business magazines like Forbes. But four do. So be one of those four little businesses that succeeds. Here’s how…
The top 10 reasons small businesses fail
Globally, small entrepreneurs have a hard time 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. The knowledge of how to succeed is also important.
If we follow the top reasons for small business failure, we’ll find a pattern of behaviour that we need to avoid. So, if you have this data at your fingertips, you’re halfway on the road to success. Just take heed of the mistakes new small businesses make, and ensure you don’t follow their lead.
This is why we dedicate our Accelerators to avoid these issues and get strong businesses that succeed and make profit consistently.
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 along the road to success. It's your guide to what you want to achieve going forward, your basic business plan that outlines where you're going, and how you intend to get there. Without the information of a clear long term business plan of what your company is going to do, you won't achieve success.
List in detail exactly what your business operations involve. Work out what sets them apart from others, and the services that you intend offering. 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 whose 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 where you know exactly 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 who 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 what nobody else is offering, or create a service or product that is a cut above the others.
Niche markets are the way forward. Find your niche, specialise in it and offer it to the market. That's the way to succeed. It's that simple.
Part of succeeding is being able to predict 'the next big thing'. You need to be able to understand how people behave, what they want and how you can give it to them. You have to understand the causes of human behaviour to the extent that you know instinctively what your audience will need next. Then you can give it to them.
You must be willing to offer something new and exciting just as they realise 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 make sure 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. There are numerous loans available to assist small entrepreneurs. You can also request finance to purchase equipment. Government offers certain companies financial support, too.
So it’s a good idea to do your homework and 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. It’s important to 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 cash your company will eventually accrue as profit.
4. Not hiring the right people for the job
Human resources is another field entirely. Hiring and retaining good staff is essential. Hiring friends and family members often isn’t the answer for small business owners.
You need the knowledge to get the right people to do the job for you, to create a work culture that makes people enjoy what they’re doing and give you their best. Make a point of hiring people to do the work for you who are like-minded people with the same values and work ethic as yourself. Hire the best and you’ll be rewarded.
5. Not researching your product properly
If you don’t do the homework before starting a business, you have far less chance of succeeding. You have to research every aspect of your company product or service to make sure that it will work, that you know who your market is, and how they will receive that product or service. If you’re not offering something that people want, you can’t succeed.
If the product is difficult to use, seasonal, or risky, the chance of success isn’t great. So make sure that you research every single aspect of your business model. Identify whether your product or service is something that people will be willing to pay for. And make sure to 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 have no idea it exists. You need to make sure that 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. You need to find out what would work best for your business.
You need a web site set up and running, social media posts to ensure customers stay interested and digital marketing strategies in place. 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 and suppliers
Marketing (see above) is the way in which you communicate with your possible audience. And if you don’t have a way of communicating with your audience, 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’. It’s the only way to have a good idea of what they want from your business service or product.
By the same token, you need to build up a good relationship with your suppliers to ensure that they are with you every step of the way when it comes to looking after your audience. Customers and suppliers need regular feedback. You need to make sure they’re always in the loop about how your business is operating. No privacy required here, just honesty.
Make sure that you 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 to sour a business relationship. It's also the first step towards businesses that fail. So find a solution to these problems before they happen.
8. Your business service or product is not timeous
If you open a business at the wrong time, it’s doomed from the start. Timing is everything. Research is just as important. And listening to what your prospective customer wants is another vital part of being a successful business.
Sadly, one of the first ways that you’ll find out that your offering isn’t what people want is through customer information or feedback. And this is just another good reason why it’s so important to listen to what your customers want. A reason to make sure that your audience is being offered exactly what they want at exactly the right time.
9. Not taking notice of your competitors
Many entrepreneurs put their heads in the sand when it comes to knowing what their competitors are doing. And this is really bad for running a business.
You need to have an excellent idea of what your competitors are doing so that you can always be one step ahead – if you don’t do this, you’ll lose business. We’re not suggesting you need to be obsessive about your competitors. But you need to keep an eye on reason
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, make sure to up the ante and offer the very best. 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.
Be willing to learn from competitors as well as from your own team. We can all learn something new every day. So be willing to try. And the more open you are to learning, the more you're likely to succeed.
Nothing ever stays the same, so be open to change, to new ideas and new perspectives. It's the only way to stay ahead of the game.
You want to expand your reach and grow your business? You want to have laser focused marketing that gets results and be in the 4 brands that succeed? Check out our Accelerators and you will be able to use your resources into what matters and see real growth in your business.
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