Why do small businesses fail?


by Marvist - Date: 2007-06-04 - Word Count: 645 Share This!

Starting a business of your own has a lot of benefits such as being your own boss, facing new challenges, a high growth potential and reaping all the rewards of your hard work, however, success in a small business can never be taken for granted. Entrepreneurs who want to run their own small businesses cannot afford to ignore the difficulty of starting a business. The following are the primary reasons for small business failure

- Lack of planning:

Not having a proper business plan is a major pitfall that can lead to failure of a small business. A SWOT analysis is necessary to be able to overcome difficulties during its growth. A business plan gives proper direction to the business.

- Trying to make a hobby into a business:

Not every hobby can be transformed into business. Before planning to start a small business, the idea must be thoroughly researched for its feasibility.

- Inexperience in managing a small business:

To run a small business successfully it is necessary to be familiar with several aspects of the industry, its trends and possess the skills necessary to market one's products and services. Inexperience in these aspects can result in failure of the business.

- Poor record keeping and financial controls:

Not maintaining good accounts of profits and expenses, taxes etc is also a cause for small business failing.

- Entrepreneurial enthusiasm:

Entrepreneurs must learn to differentiate between "true opportunities" and just new ideas that are not practical. It is necessary to compare the idea with the business plan objective and see if it the skill and time is really available to put the idea into practice.

- Inefficient money management:

It takes about a year or two for small businesses to make profits, so not having proper resources can hamper the growth of the business. Also, personal use of business funds must be prevented.

- Dependence too much on a single element:

Small business owners must be careful against offering just a single major product service or having just one big client. Though this might be the major source of profits they must think of what might happen when they no longer have the source and try to broaden their horizons.

- Competition:

Competition is a major factor influencing the success or failure of small businesses. Therefore it is necessary to identify the exact nature of competition, their services and how our products/services are superior.

- Poor marketing:

The success or failure of a product can depend on good marketing. Therefore it is important to research every marketing method used and stick to those that are yielding results.

- Entrepreneurial exhaustion:

Having a small business requires patience, capital, time and energy. Not every individual is cut out for it. Long work hours can cause exhaustion and lead to a lack of interest in the business which can stunt its growth.

- Faulty location:

Visibility is very important for the small business. If the store is not easily found by clients and suppliers, profits could suffer.

- Poor selling techniques:

Business fail if owners are not able to get potential customers to buy their products.

- Postponing tasks and improper time management:

Deferring important tasks can be lethal to a business. Staff can be hired if necessary for doing tasks that a business owner doesn't like to do.

- Inferior quality customer service:

A bad quality customer service such as not replying quickly to emails, phone calls etc can lead to customer dissatisfaction. Also, not giving the customer what he wants may weaken the bond with the small business owner.

Marvist is an Internet marketing research and search engine optimization firm providing professional SEO, pay per click management and web analytic services to help companies to increase online sales and improve their profitability. Marvist was founded in 2005 and has been rapidly growing since then and has clients now in seven countries including USA, Canada, UK, Spain, Japan, Australia and New Zealand.

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