10 Reasons Why Small Businesses Fail & How to Avoid Them

There's some positive news regarding small businesses staying afloat in 2026. Those of us that have managed to stay around through 2025 stand a higher-than-usual chance of remaining in business in the coming year. While current forecasts predict that there will still be numerous insolvencies in 2026, this will be lower than in the past two years. In fact, 2024 reached a peak, 2025 was a little better and 2026 is expected to be the best year so far for small businesses.

Regardless of how many businesses do fail in the coming year, we need to be positive about staying around. And to be successful now, there are certain things you can do in your small business. Let's take a look...

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 how 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 essential.

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 small businesses fail, and the ways you can ensure your business isn’t one of them… 

1. Not Considering 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 different. 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 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 route to success. 

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 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 ensure 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 have sufficient capital, you could take out a business loan. There are numerous loans available to assist small entrepreneurs. You can also request finance to purchase equipment. The UK Government offers certain companies financial support, too.

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. Hiring the Wrong People 

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 find the right people to do the job for you, to create a work culture that makes people enjoy what they’re doing, those who will give 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 yourself. Hire the best and you’ll be rewarded.

5. Not Enough Research

If you don’t do the homework before starting a business, you have far less chance of success. You have to research every aspect of your company product or service to ensure 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 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 iron out any problems before they arise.

6. Marketing the Business Incorrectly

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 ensure 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. 

To attract customers and keep them, you must market using a mixture of adverts, direct emails, posters, flyers and other materials that will drive sales and make your company known. This includes a media privacy policy.

You must have a website 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 Taking Care of Customers & Suppliers

Marketing 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 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 that they are with you every step of the way when it comes to looking after your customers. Customers and suppliers need regular feedback. They need to be in the loop about how your business is operating. No privacy required here, just honesty.

Ensure 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 Service or Product Isn't Timeous

Timing is everything. If you start a business at the wrong time, it's unlikely to succeed. Research is also essential. And listening to what your prospective customer wants is another vital part of creating 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 ensure you offer your audience exactly what they want at exactly the right time.

9. Ignoring 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 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 be obsessive about your competitors. But you need to keep an eye on them.

You must be able to explain to your audience why what you offer is better and more valuable than what competitors are offering.  And if you find that their offering is more valuable than yours, it's time to up the ante and relook your offering. It’s the only way to stay ahead of the pack.

10. Being Unwilling to Learn

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

Take note of what competitors are doing, and monitor your own team, too. We can all learn something new every day. Be willing to try. The more open you are to learning, the more you're likely to succeed.

Nothing ever stays the same, so be willing to change, to try new ideas and listen to new perspectives. It's the only way to stay ahead of the game.

We Can Help Make Your Business a Success

You want to expand your reach and grow your business? Want to have laser focused marketing that gets results? Check out our Accelerators and you can use your resources and see real growth in your business. 

Find out where you should be focusing more of your energy in order to get your design business performing stronger, operating smarter and scaling easier.  

Our rapid-fire quiz produces a tailored assessment  that will help you to bridge the gaps that may be slowing down the growth potential of your brand. 

It only takes two minutes or less! 

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