Eight Reasons Why Businesses Fail

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Businesses do fail, and it is undoubtedly still one of the greatest enigmas in the modern world. Some fail miserably in the very first shot. Often business owners either do not talk about the failure or consider it their “bad luck.” However, disregarding clear and nuanced warning signs of crisis in your venture is a definite way to end yourself on the wrong side of the growth curve.

The most tragic thing about a failed business is that the owner is utterly unaware of what is going on until the company shuts down. Some may be loving in denial, while others are completely unaware of their mistakes. Regardless, if you don’t want to fall in either category of fail-entrepreneurs, here are the ten most apparent reasons for business failure and some tips on avoiding them.

Lack of knowledge and skills

One of the most underrated reasons is that business owners do not recognize the need for expert skills and know-how to ensure business growth and success. Yes, you can start a business if you have got a handful of cash, but can you make it a massive hit based on that only? No, not in today’s highly volatile economic space. 

A degree in business or marketing will prepare you to understand the legal implications of owning and operating a business. It will also help you prepare for everyday business expenses, stock market navigation, and deciding how to promote or produce a product or service. In short, business education will teach you how to manage a business and increase your chances of succeeding. But worry not. If you feel that you can’t squeeze a regimented higher learning program into your current routine, opt for a flexible option instead. You can enroll in an online MBA no GMAT required to acquire the proper business skills to ensure your brainchild blooms into a successful company.

Poor planning

As there’s a saying goes: failure to plan is planning to fail! You’ll never get there if you don’t know where you’re going. But with proper planning, you can generate engagement, alignment, and ownership inside your business by having a clear and actionable strategy. It is essential to create a map that highlights where you want to be, where you are now, and what you need to do in order to close the gap. A plan is all you need to make your business more survivable. So, before you start building castles in the sky, ensure you have a proper business plan ready.

Ineffective leadership

Leaders aren’t born; their experiences sculpt them. It’s no longer enough for businesses and companies to have executives who can merely “lead” without a strategy or rapport. Many executives micromanage their people, which leads to bad morale and productivity. 

Anyone with a position of power is responsible for ensuring that everyone on the team is working towards achieving common goals. Leaders are integral for any company because they create the roadmap for organizational change and are responsible for its development. You can hone your leadership skills by taking short courses, mentorship, or sheer experience.

Lack of inspiration and motivation to grow

After success in their startup, some business owners often consider themselves as achievers of everything, which leads to mis-mapping of the meaning of business success. There’s always room for further growth and innovation. Unfortunately, inertia and a myopic business vision can lead to stagnation, demotivation among the employees, and eventual demise- the perfect story for business tragedy.

Reaching out to innovative, profitable, and inspirational business resources is an integral part of growth. Interacting with new people and welcoming new ideas/professionals are just a few strategies to spark a wave of positive change if things are slowing down. Hence, always be inspired and motivated to do better.

Poor management

Mismanagement can happen at multiple levels. At the operational level, it can severely hamper business productivity due to poor performance and lagging targets. At the financial level, it can sink the entire ship without you even realizing it.

Attitude and mindset play an essential part in the management process, and they impact the bottom line. It is especially true for seasoned entrepreneurs. When it comes to doing things, business owners sometimes get stuck in their ways. Ensure you don’t fall into this trap if you want your business to succeed.

Poor delegation of duties

During the early stages of a business, money is always scarce. It may or may not be one of the reasons for the failure of the company. More importantly, how you manage the funds and utilize the resources is fundamental. It is preferable to outsource or assign responsibilities to the appropriate persons. Instead of being a “do it all” boss, you should assign duties to specialists who can carry them out effectively and maximize your company’s productivity.

Incompetency in a highly competitive environment

In business, competition is unavoidable. However, there are situations when competition is so intense that it eventually overruns your business. Competition should not be a source of dread but rather a motivator to improve and separate from the herd at the right time. It all depends upon the decisions that you take and how you cope up with the environment. Research your competition thoroughly and use that information to acquire a competitive edge. One of the best ways of staying ahead of the curve is by focusing on a USP.

Not being in the right market

It’s critical to be aware of your competitive market and your clients and customers. If you don’t know who you’re selling to, how will you be able to build a loyal customer base and sustainable revenue stream? Hence, always be sure of your target market to make progressive decisions. Answering questions about who your consumers are and how much they’re ready to spend is a big step toward presenting yourself in the best light. 


Why do businesses fail? It is one consistent question that every person asks. And the truth is your business can fail, even when you think you’ve done everything right. You’re lucky if your business survives. You’ve accomplished something that 90% of the enterprises fail to do. The chances of a business succeeding are limited, which is why it’s imperative to pay attention to every aspect required to run one successfully. The above-listed ways can help you evaluate the Dos and Don’ts that you should consider to avoid mishaps and save your business from failure. 

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