Why Small Businesses Fail

Why Small Businesses FailSmall business fails due to many reasons, and it is necessary to evaluate some of the main reasons to guide entrepreneurs. Evidence shows that over 90% of start-ups fail which warrants investigating the forces driving the high level of failures among small businesses. Below are some of the main reasons why small businesses fail.

1.Poor management

Management is concerned with using people and other resources to accomplish organisational goals. Entrepreneurs in small businesses must be good managers to avoid failure. The fact that small businesses face resources constraints implies that hiring professional managers might be impossible. It is, therefore, necessary for the owners of small businesses to be conversant with the right management practices to avert failure.

2.Failure to satisfy customers

Customers are the king, and no business can survive without satisfying its customers. Small businesses fail because the owners do not understand customer expectations. This failure leads to products and services that do not align with customer expectations. The long term success of a business depends on customer loyalty that stems from satisfying customer needs. It is vital to gather market intelligence that is used as a basis for product development and service delivery. A satisfied customer base enables a business to increase its market share due to the high customer retention rate and the ease of acquiring new customers. Satisfied customers spread the good news about the company’s superior service that attracts more customers.

3. Lack of a reliable online strategy

Failure to exploit online capabilities is a primary reason why small businesses fail. The internet provides enormous communication, marketing, and research resources that give a business a competitive advantage. It allows small businesses to gain leverage enhancing their ability to compete with large enterprises. For instance, a micro retailer can compete with a large retailer that has multiple physical locations by establishing an online store. By doing so, the small retailer can overcome capital barriers and access the global market as the internet can span the globe without restriction. An online strategy is a combination of an SEO friendly website that is also user-friendly, social media profiles, and the use of emails features gives a business a strong online presence.

4.Poor planning

Lack of proper planning is another reason why small businesses fail. Planning is the process of establishing organisational goals and deciding how best to realise these goals. It involves setting the organisation’s mission and vision statements and subsidiary goals. A mission is vital for a small business as it shows where the organisation wishes to be in future. A mission statement gives details on what needs to be done for the firm to actualise its vision. It is, therefore, a road map to vision accomplishment. Poor planning creates confusion as members of an organisation fail to understand precisely where the organisation is heading.

5.Wrong reason for starting the business

Evidence shows that people start businesses for the wrong reasons such as joblessness and to compete with friends among other incorrect reasons. A business should be influenced by a market gap where an entrepreneur identifies an opportunity comprising of an unsatisfied need. Such a business is built on a strong foundation as efforts are directed toward addressing specific market needs.

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