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Top Seven Reasons Why Small Businesses Fail

March 13, 2012

You might have an excellent idea and the know-how and dedication to get your small business up and running. But don’t think for a second that means you’re going to succeed. An overwhelming number of small businesses end up failing within the first year. If you don’t want to be one of them, keep in mind the top seven reasons why small businesses fail.

Lack of Capital

They say money isn’t everything, but for your small business, it definitely counts for something. Unfortunately, many small businesses fail just because they don’t have enough cash to make their dreams a reality. You can’t succeed if you have no money to spend. Concentrate on securing investors and getting loans so lack of capital doesn’t stand in your way.

Poor Employees

The employees or partners you hire will have significant roles in the success of your business. You can’t do everything yourself, so it’s crucial to hire hard-working and trustworthy people to help you.


If you hire the wrong people, your business will suffer in their hands. Make sure you spend a considerable amount of time to interview employees, perform background checks, and check references.

Wasted Spending

Running a business costs a lot of money, especially when you’re just starting out. Just because you have significant capital doesn’t mean you can afford to spend it anyway you like. Be very careful to make smart spending decisions, and don’t waste money unnecessarily. Spending too much on non-essentials can quickly drain your accounts and ruin you.

Inadequate Marketing

If no one knows about your business, you can’t hope to get any customers. Make sure you spend an adequate amount of time and money on marketing, because it is the only thing that will drive the money to you. Spend for traditional marketing like newspaper ads and fliers, but also take advantage of free online promotion through social media as much as possible.

Lack of Focus

As an entrepreneur, you probably have a ton of ideas floating around in your head. But when you finally start making one of your ideas happen, don’t lose focus on it. Don’t let your other ideas distract you, and make sure you have a very clear idea of exactly what you’re doing and what your goals are. Keep your focus as narrow as possible to avoid diversions.

Playing It Safe

Some of the biggest rewards come from taking the biggest risks. If you don’t take a chance, how can you ever hope to gain anything? Yes, you want to be careful and make smart decisions so your business can thrive. But you also have to be willing to put it all on the line and go for it. Don’t play it safe. Take risks with confidence and determination.

A Bad Reputation

If you want to succeed, your customers and clients have to trust you, or else they simply won’t do business with you. Worse than that, they’ll tell their friends not to do business with you. Especially in the early stages, it is incredibly important to get a reputation as a good person and a solid business. If it goes the other way, you might never recover.

Maria Lam is a freelance artist currently living in Sausalito CA, The majority of her work is in oils using a bamboo brush. When she engages in writing to share her experiences as a freelance she trusts Grammarly grammar checker. This grammar tool provides her with the peace of mind of having delivered a concise and easy to read piece that will delight most audiences.

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