List of the Major Reasons why Small Businesses Fail

Why do businesses fail and what to do

There are new businesses coming up every day and companies going out of business each new day, even in the same industry and with the same type of business. This is how it has always been and the circle goes on. 

Several findings have shown that small businesses fail most and the possibility of 8 out of 10 new establishments will fail within their first 10 years is very certain.

Why do small businesses now fail? and what makes a business successful? We’re going to be looking at the common reasons for online business failure.


Failure to plan properly: 

The online venture is no different from a physical venture, in fact, it could be more challenging running an online business compared to a physical business since competition is more and things change rapidly in which you’ve to react quickly, keep up with the latest trend and adapt fast.

Many small online business owners get motivated by the results of other successful businesses without understanding the cost of fueling such enterprise, the market, the risk involved, the time taken to achieve the result, and others.

Why do businesses fail and what to do

The Secret is an example. The secret is an app where people make short posts about their experience anonymously, either it’s going to be true or not but when the management could not find a way of overcoming bullying on the platform, the CEO got it shut down.

From the statement of the CEO, David Byttow, it was obvious that he has not planned well how people can freely make their opinion known without revealing their identity and be disciplined enough to be just in their expressions and respect other people’s businesses.

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Thinking Online Business is Cheap

Using the search queries from Google and forum discussions related to starting an online business as a case study, most potential small businessmen and women who want to run a business online from home don’t get prepared to make budgets.


More people are searching for how to start an online business without having money, getting a free promotion, free resources, and other things needed to make the business successful but unfortunately, most free things online still come with risks, even as simple as free email.

I’m not saying you can not do online business without spending money but you’ll have many tools to help you if you have a budget and there will be more time to do many things rather than doing the whole work yourself.


Not having the Time to run your business

Communication is very vital in online business. If you can not respond to emails quickly, you’re going to lose many clients. Online users are always in rush in their dealings.

The way someone will wait for you while you’re out of the office would not be the same when you don’t respond to chat or update your service.

Once you’re growing in business or you’ve other activities to attend to offline, there should be a replacement for you to take charge of your responsibilities.

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Social channels are becoming the fastest medium to connect with your fans, potential clients, and customers and if you’re not updating them from time to time, they will soon forget your business exists.

Starting or growing your business with sba

Doing too much than your capacity

It’s good to scale up if you’re already doing well in business. Opening more channels, launching a new product or service, expanding your market reach is all good but most people do without the long-term effects.

Do you understand the new market? Have you saved enough to fight the competition? Would you be able to manage all? among several other questions should be answered before replicating your business or creating new ones.

Another good example is when Endurance International Group (EIG) shut down e-Host after they acquired it to expand their market reach despite owning several other web hosting companies, including Hostgator, Bluehost, and ipage and couldn’t develop the brand to compete successfully in the domain and web hosting business.


Not Putting value first

A significant percentage of the businesses that fail don’t have standouts in their industry and it’s therefore very important to learn from the mistakes and failures of other business owners.

Profit should not come first in your planning but value. Almost every market is saturated, either in online business or offline. The ability to succeed is not in doing what others are doing but doing better than others in a unique way.

You may not have the financial muscle to compete with the leaders in your industry but you can be creative in branding your service in such a way that your clients would choose you first.

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For example, you can ask your clients and potential clients to contact you on platforms like WhatsApp or Skype and keep in touch with them at any hour of the day.

You can even follow all your clients on social media as a small business owner and interact better with them than any big brand could be able to do.



Some businesses are shut down just because the owner is extravagant in spending and not thinking much about the cash flow of the business. If your expenditure is on the increase, make sure you’re buying more assets much more than liabilities.

However, if you’re spending too much on things that would not bring value to the business, then revenue would experience a dip, and profit would take a shift from the green side to red over time.

Spending your profit outside the business is not good for the health of your business organization.

You need to constantly reinvest your earnings and save for the periods you’d be having a bad market.

There are several reasons why startups and established businesses fail and there are common causes to them all irrespective of the industry, their business, and location. Some of the major causes are discussed and we hope to talk more on this topic.