Why businesses fail

Why businesses fail

There are many different numbers out there on exactly how many businesses fail. They are usually given within a specific time period.

Whatever the real number is. There are a lot of businesses that fail. Like a lot a lot.

I am not trying to put you off starting a business. Quite the opposite actually. The reason I am writing this blog is to identify some of the common pitfalls for businesses and figure out how they can be avoided.

Business can be tough. I won’t sugar coat it. This is evidenced by the large number of businesses failing to succeed.

By looking at the reasons why they failed, this presents an opportunity for people to learn. In doing so, you will put your business in a better position to succeed.

Hopefully this blog helps you learn why businesses fail and to take steps to ensure yours not only avoids failure, but becomes a roaring success.

Here are some of the top reasons why businesses fail.

Not understanding target audience

This is a big one that I see and hear about all the time. People struggle to find an audience for their product or service. It goes without saying that without an audience, you will have no business.

This blog provides some useful methods to help you understand your audience better.

Can’t create a profitable business model

A great idea for a product does not create a great business. A great product is only one aspect of a successful business.

There are a whole bunch of other ingredients that are necessary to make a business work. Many businesses have a great product idea but are unable to translate that into a profitable business model.

Running out of money

This is one that can happen all too quickly. Running a business costs money and those costs can spiral out of control pretty quickly if you are not that careful.

Maintaining a healthy cash flow is essential for your business to keep on operating in the black.

Inability to adapt

This article from Raconteur argues that staying agile is the key to business success.

The world we live in is constantly changing. This can be due to the constant developments in technology, changing political landscape and other global trends.

This means that the world of business is constantly changing as well. In business, you also have the added possibility of new competitors.

To stay competitive, we must adapt. Just because something is working well one day doesn’t mean it will necessarily work the next.

Founder burnout

In the early days especially, as a founder, you pretty much are your business. Developing a business to be self-sufficient without you is going to take a little time.

If you crash and burn before that time, your business will likely crash and burn with you.

We all know starting a business takes time. Long hours, hard work, and plenty of disappointments are on the horizon.

This takes its toll on people. No one ever said starting a business is going to be easy. You should be prepared for this when you start yours.

How do you avoid these pitfalls?

Just because these are common reasons why businesses fail, doesn’t mean they are a given. There is a lot that you can do to make sure this doesn’t happen to you.

The fact that you know and can understand what the common pitfalls are is going to help you to overcome them. Complacency is your worst enemy in business. Humility and resiliency are what will make you successful.

Here are some ways to reduce the chance of your business failing.


For me, this is the big one. Most of the common pitfalls we identified earlier can be negated by conducting thorough research.

This will help you understand your target audience and where to find them. This will help you adapt, and learn how to make your business profitable and so much more.

I’m not just talking about research when starting your business either. Research should never end, you should be constantly looking to increase your knowledge of business and the markets you operate in.

Ask any entrepreneur. They will tell you that the thing that will make you successful is knowledge. Research is the way to build your business’s knowledge. Do this well and you will reap the rewards.

Check out this blog for more reasons why research is so important for your business.

Time Optimisation

Great processes are the nuts and bolts of your business. They are what holds everything together. Strengthen your business by strengthening its processes. You do this by optimising them.

Finding what works and what doesn’t. Removing the dead weight and saving yourself time. By optimising your processes, you are going to find more time that you can spend on other tasks. This will help you to achieve more, giving your business a better chance at thriving.

This can even result in decreasing the amount of time you need to be working on your business.

There are a lot of advocates of building a great work-life balance, and for good reason. This article details how working too hard is causing health issues and actually decreasing your productivity.

If you are not careful, a poor work-life balance can cause you to burnout. By optimising your time at work, you will be able to spend less time on it and more time living that life of yours.

Reducing costs

This seems like a no brainer, right?

Perhaps it is, but it is also a no brainer that is easy to forget or can lack appropriate prioritisation.

Think about it. When was the last time that you bought something that was unnecessary? I can hold my hands up and say that I am guilty of this in both my personal life and my business.

It is very easy to make a quick decision and purchase something that isn’t necessary for your business.

I mean, if you have the healthiest cash flow going, then spend money. But like most businesses just starting out, this is not often the case.

Spending frugally, especially in the early days, is going to help you maintain that cash flow needed to keep you out of the failed business graveyard.

Think about what you really need, not what you really want. Hold off, where possible, on bigger purchases until you have a good cash flow into the business.

Research purchases before you make them. Is what you are buying the best choice for your business or just what is right in front of you? Perhaps there is a better more cost-effective option.

Hiring is a large cost, consider if a permanent employee is the right move or if that job could be done by a freelancer or agency. This could save you a lot of money in the long run.

Being thrifty in the early stages of starting your business is going to really help you to make it successful in the long run.

Here is a list from Quickbooks on more ways to reduce costs in your business.

Don’t be complacent!

No matter how well you are doing, you need to make sure you are constantly developing your business. Optimise your processes, increase your knowledge and spend only on the necessities.

Don’t get overwhelmed, take a moment to breathe and understand what is happening around you. As long as you keep moving forward then you will become successful.

Let's make sure more businesses don't fail

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