Top Reasons Why Small Businesses Fail

Veröffentlicht am: Apr 12, 2022Citizen Entrepreneurship Competition
Entrepreneurship Campus

Von Entrepreneurship Campus

Top Reasons Why Small Businesses Fail

You have a unique business idea. Is that enough to be successful? Regardless of their uniqueness, it’s very common for small businesses to fail. Learning the main reasons why a business can fail, might help you turn your unique idea into a successful and thriving enterprise.

According to, in the United States, 20 percent of small businesses fail in their first year, 30 percent fail in their second year, and 50 percent fail after their fifth year. Meanwhile, 70 percent of small businesses fail in their tenth year. Moreover, the same report pointed out that in terms of industry, a small businesses in the healthcare or social assistance industries had the highest survival rates. They were even projected to grow during the upcoming years. This is great insight for our #CEC22 contestants who are widely oriented toward solutions that focus on the overall social and environmental well-being of their communities.

The above-mentioned statistics can be daunting both for novice entrepreneurs and seasoned businesspersons. However, if you dedicate some time to learning what choices business owners have to make to jeopardize their business success, you might avoid falling into the same mistakes.


Overconfidence or low self-esteem

In other words, not keeping your sense of self-worth and your business success status divided.
If your business is successful, always be aware that things might change. This said overconfidence in business can either lead entrepreneurs to success or failure.
On the other hand, if your business is struggling, don’t let a negative mindset undermine your efforts.

Inexperience/ incompetence

When you know nothing about the business you’re getting into. For example, if you don’t know how anything about sewing or fashion design, maybe you should avoid launching an affordable fashion brand. Focus instead on fashion blogging.

Spending too much time planning

… and someone else has launched a similar business while you’re still planning.

Caring too much about competitors

If a competitor launched a product very similar to yours while you are still working on it and you get demotivated, then maybe you should pick an interest in a career other than entrepreneurship. An entrepreneur will always have competition. Thus you should keep a balanced attitude towards competition. This means being aware of what is happening around you, taking notes on how competition businesses are going, focus on how to improve your execution strategy and launch.
Either don’t underestimate them. Just give your competitor/s a competitor.

Bad timing

They say effective timing is anything when launching a business. You launch a product or service because the market needs it and there are customers ready to pay for it. However, there are cases of innovative products that have been ahead of time. People may be skeptical, but if ‘there’s a need for your product, they will start to buy it no matter if you are the first-mover or the second-mover.

Failing to understand the market

This is simple, you need market research before and after launching. If a business cannot meet the expectations of its potential customers, that’s a problem. Unsatisfied customers are great, especially at one thing: leaving bad reviews.
If you are stubborn to adapt to new trends, others will not be.
On the other hand, no matter how great your service or product is, if there are no customers willing to pay for it, you better leave that idea for another moment.

Money management issues

There are so many things that fall under money management issues for a small business to name a few:
Borrowing amounts of money that you cannot afford to pay back.
Overspending on unnecessary stuff right after you launch
Spending money in the wrong places
Not having capital for at least one year in the bank
Spending too much on unnecessary marketing materials
Wasting income or money reserves
Having only one single source of revenue

Management issues

No matter if you’re one, two, or three persons, in the beginning, you will have to carry out a lot of tasks on your own. Some might be boring and time-consuming, and others might require skillsets that none of you has. You have to be prepared for this part of the entrepreneur’s life. Sometimes the best thing to do is to hire a professional to take care of delicate processes that can cause a lot of trouble or financial loss if not handled properly.
Poor management issues depend on the people that work for you. Are they satisfied with their daily tasks, is communication between your teams good. Are they happy, etc.?
Are you happy? Do you have the initial desire to build a successful enterprise or are you getting lazy and tired? Are people in your company taking advantage of you for being too nice?

What Makes Someone a Good Entrepreneur?

Other important reasons

Underestimation of marketing and sales
Not searching for clients
Focusing only on the technical part of your service/product while neglecting design

Deciding to become an entrepreneur is a life choice that comes with many benefits and uncertainties. We often write about the urgent need for getting people of all ages, especially the young ones, involved with entrepreneurship. The reason why is because there is a need for a fresh and innovative approach toward economic development. Younger generations feel threatened by the consequences of old economic models. Thus, they are the most motivated to power the switch to a new responsible, and sustainable way of doing business.

That's why the Entrepreneurship Campus works to make the entrepreneurial education and mindset available to everyone, especially to those, who need it the most. Anyone can take our free online training and those who feel challenged can participate in the Citizen Entrepreneurship Competition 2022 #CEC22 with an innovative idea or project.


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