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15 reasons why entrepreneurs and business owners fail

Photo by Mahdi Bafande on Unsplash

Entrepreneurs are known to have a keen sense of business and their customers, but sometimes this natural (or learned) ability to understand the market, money or their customers can fail some business owners.

The list below shows some common reasons why you could fail entrepreneurship and business:

Entrepreneurs sometimes overlook competitors

Customer failures can cause business problems

Money worries are a constant threat to small businesses

Leadership failures due to poor decision making

Marketing decisions lack understanding and planning

Entrepreneurs sometimes overlook competitors

Unless you’re creating a new business category, you’re likely to meet strong competition. The number and size of your competitors may vary, but it’s almost certain you will have to deal with competitive pressure throughout your business life.

1. Lacking any understanding of the competition

Common advice is to focus on your customer needs. It’s wise to be aware of your competition. There will always be a competitive business wanting to take your customers.

You need to understand the businesses within your niche that you should be concerned or cautious about their progress.

Even if you’re not concerned. Ensure you’re aware of your competition, so you know your position in the industry and your customer’s eyes. You don’t need to be focused on your competition, but you do need to understand your business and potential risks.

2. Failing to change and grow as the industry changes

Everything changes.

Change is an inevitable part of life and business. Change is an external factor of organisational change. Therefore, you should understand how wider changes can affect your business, your products or services. Your customers will be aware of changes and so should you.

3. Releasing products or services that lack customer value

Customers are focused on their interests, needs and wants.

If you can divert your customer’s attention from what they’re doing to engage with your creation. You could be on to something. If you can also prevent your customer from leaving then you’re definitely on to something. If your customer gains value from your product or service, they could tell their friends and come back to reorder and that’s when you have a real business.

However, your success is risked by providing customers with a substandard product or service which does not differentiate from competing options or does not provide any value.

For business success, it’s important that you stay close to your customers to understand their needs and try to meet their product or service needs and engage or build a community to deepen your customer relationships.

Customer failures can cause business problems

Failing to maintain a customer focus could mean your business will find it difficult to meet your customer expectations.

4. Failing to listen to current customer experiences, needs and wants

Your customers will have opinions. They could love your products, but hate your customer service. They could gain value from your face-to-face consultancy, but they might think your video courses are a waste of money.

Listening to your customers is important to ensure you’re feeling the ‘pulse’ of your customers and receiving unbiased opinions from the people that matter. Questionnaires or using a dedicated customer success or customer service manager could be a way to gain genuine insights into your customers’ needs, wants and their experiences.

5. Ignoring the need to improve the business

Following on from the previous point. Running a business requires many different skills and finding customers is one of them. Another skill is listening to your customers and acting on their comments, feedback or insights.

Information provided to you by your customers is valuable, collecting and acting on this information will help you make the most of your businesses’ offer.

If you can amend your offer to meet customer expectations and remove issues from your solution. This will provide you with a good chance of exceeding your customer’s perception of your business.

6. Relying on a small number of key customers

You may want to provide your customers with a good offer and you might have been successful securing a large client that values your offer.

This is great news but could be tinged with problems. A common entrepreneurial mistake is to lose focus on new smaller customers and concentrate on large clients or customers.

What would happen if you were to lose your key customers?

An over reliance or focus on the large client could have significant consequences for small issues. Such as, slight payment delays or temporary order reductions. Both could seriously affect your long-term business.

If you go above and beyond for your large client without maintaining the same level of interest over the rest of your customers. There is a possibility your smaller customers will find alternative options. The combination of small customer loss and large customer reliability could be the reason for your business failure.

Money worries are a constant threat to small businesses

Having enough funds to run your business is an age-old concern from every business owner. Many businesses require significant cash to get started due to their business model or regular cash injections to continue operating.

7. Lacking money or funding to run the business

Ideally, your personal finances should be in good shape if you’re starting a business or running a side hustle. A good grasp of your personal accounts and knowing where every penny is going will help you make it through uncertain times when income may not be regular and predictable.

This is why the standard advice is for you to pay off your debt before you think about getting involved in a business opportunity.

Unfortunately, life is not perfect and we all have to deal with personal and business worries. There is no need to panic if you’re not in ideal financial shape, but you will need to do some calculations to work out your burn rate. (i.e. How long your business can continue to operate with it’s current finances).

For example, if you have 10 thousand in savings, your business does not make any money, you need 1 thousand a month to live and you have 1 thousand a month of business expenses. This means you’re spending 2 thousand a month, you would last for 5 months before you have used all the money.

If your burn rate is faster than you would run out of money in less than 5 months and if you don’t anticipate any business revenue for 12 months. You could have a big problem.

Therefore, you will need to increase personal income, increase business income, reduce personal expenses, reduce business expenses or do everything at once.

8. Failing to understand cash flow or relying on poor financial management

Revenue is Vanity, Profit is Sanity, but Cash is King”

This well-known phrase is one that has been attributed to Elvis Presley and other sources who have repeated the same thing over the years. It doesn’t really matter who said this one first, but what will really kill your business is not understanding cash-flow.

For example, you’re selling an online product, but your product is built by an external manufacturer and shipped to your warehouse. If you have a big order from a high-street retailer, who wants you to commit to trialing your product on their store shelves, you could have an issue if you do not have money to pay for your product manufacture.

If you do not have the money in your bank account to pay for expenses, it will not matter how much money you have on paper. Solving this cash-flow issue is common for entrepreneurs and something that you will need to understand and resolve when working with customers and suppliers.

9. Delaying or ignoring future growth potential

Everyone should live in the present, but only focusing on your business in its current form can be the death knell of many entrepreneurs.

Taking the time to think about your business model means you have a better chance of making decisions in the present day that can help you in the future.

Asking these questions will help you think about the best way to get to the next stage of your business. The following questions can help you think about the present and future at the same time.

  • Do you have the best business model for today and the future?

  • Will you have to change how you work and sell your products and services?

  • Is moving to another product line better for the long-term?

  • Can you handle changing from one product to another product without any help?

10. Believing in unprofitable or unrealistic business models

Many entrepreneurs are natural optimists.

However, believing in an unproven business plan, which can’t be replicated is something that should be factored into your day-to-day thoughts.

Unless you have an infinite money supply, you will need to convert customer interest into revenue, which can keep your business running. Failing quickly and moving to a new business plan or revenue plan would be preferable, so you can stabilise your business.

Leadership failures due to poor decision making

You may have read or studied tips for entrepreneurial leadership. However, there are several factors that will drive you towards failure quicker than you expect.

11. Concentrating on activities that do not drive the business forward

You need to learn the art of [good entrepreneurial decision making](internal link: how to make good decisions). So, you can choose the best decisions for your business. Failing to work on appropriate tasks can have a negative effect over the long-term.

12. Running the business solo for too long

At times it can be more productive to work alone, but small group research shows there are productivity gains when working as a small team. You can lean on each other if there are difficult decisions or your skills are weaker in a certain area or knowledge can be balanced by team members, co-founders or freelancers.

Trying to become the best at something you have no skill, interest or aptitude over the long term may always be a struggle. When you recognise you might be slipping or your interest is failing in certain areas, you need to get some help to prevent business failure.

13. Forgetting to delegate responsibilities or micromanaging tasks

Following on from running the business solo. Some side-hustle entrepreneurs who are not focused on growth will continue to stay involved in low impact decision making.

Refusing to delegate your business tasks or micromanaging your team or freelancers takes additional time. If you spend your time on the right activities, you can provide a positive impact on your business, but the opposite is also true.

Be mindful where you spend your time, as you cannot find more time.

14. Growing quickly without a plan to meet growing demands

Most entrepreneurs want business success and growth. You’re probably similar and you want to progress through the stages of small business growth as quickly as possible.

This might sound counter-intuitive, but if you’re a small business owner, you need to plan your growth and ensure you have the systems, finances and skills in place of a larger business, so you can survive at that level.

For example, a physical goods company ramping up their orders without the money in place to increase production can result in missed orders, incorrect orders and an overall poor customer experience.

Marketing decisions lack understanding and planning

Marketing is a huge discipline and one that should have a skilled person managing each activity.

However, if you’re not in that position or you want to improve your marketing skills, you should concentrate on one of the most important aspects of marketing, which leads to business failure.

15. Marketing without campaign tracking and campaign measurement

If you can’t measure it, you can’t improve it.” - Peter Drucker, Austrian-American management consultant and business leader.

If you perform actions without any feedback it’s impossible for you to understand how your marketing campaign performs. Any decision made, no-matter how well-intentioned, could be the ‘wrong’ decision from your customer’s perspective.

Measuring the engagement and outcome of your marketing campaign will help you to improve the campaigns and target the objectives you set for your marketing plans. Focusing your marketing reporting on 3 things will help you report, understand and improve your next marketing campaign:

  • What did you do?

  • How did you do it?

  • What was the result?


Avoiding business failure is vital for your long-term success.

There are many aspects of business ownership, but using the recommendations within this post will help you see the full picture and ensure the risk of making common entrepreneurial mistakes is lowered.

Otherwise, your small business won’t last long if you make too many poor decisions or ignore the warning signs.

Good luck!

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