5 Reasons Small Businesses Fail and How to Avoid the Trap

5 Reasons Small Businesses Fail and How to Avoid the Trap

Owning a small business is a reward in itself, but some of the following common pitfalls can catch even the smartest entrepreneur off guard.

Entrepreneurs understand that owning a business can be tough work.

While an owner can certainly take some satisfaction in looking in the mirror each morning and knowing that the person they see is “the boss,” there has to be more to it than a sense of ultimate managerial control.

Business owners who are adamant about growing their business through hard work and innovation often see results – while those who simply want to start a company for the sheer romance of it are often found cursing the day they traded in their cushy 9-5 job.

Creating a successful and sustainable business is challenging work, and the following five barriers are often cited as culprits when a small business begins to falter.

1. You decide to start a business for the wrong reasons

Creating and cultivating a small business because you feel it will be the ultimate moneymaker… often leads to disappointment.

If all you had to do is throw a sign on the door and wait for the piles of money to roll in, everyone would be doing it!

Successful small business owners are passionate about their company, they understand that they have to invest a good share of their waking hours to the pursuit of success, and they possess the drive and spirit to overcome obstacles on the way.

Passion trumps almost any other entrepreneurial characteristic.

Don’t chase the money – chase your passions.

2. You aren’t marketing online

Regardless of the potency of your product or the benefits of your service, you’ll find minimal success if you aren’t using all of the online and social media marketing tools at your disposal today.

Partnering with a reputable online marketing firm can help you access areas of your target market that you might have thought unreachable through traditional marketing avenues.

And, consumers these days are much more apt to trust online reviews and testimonials than your direct-to-consumer advertising – so make sure that you’re building a base of customers who are visible to others in the online community.

3. You don’t listen to your clients

5 Reasons Small Businesses FailWant some good advice?

Listen to your customers!

While most small business owners feel that they know their products and services better than a customer ever will, they’ll never understand what the customer wants unless they ask!

Seek feedback, make mid-point adjustments, and cater to your customers. A recent example of this active listening trend comes from the Tesla Motors Corporation. They are now posting open letters from customers on their website – where Tesla directly addresses the customer input and even goes as far as to commit to adopting some of the proposed changes to their cars. Detroit – pay attention!

4. No plan for aggressive growth

This is an area that seems like a positive at first, until reality sets in.

The business has become so popular and is gaining so much traction that orders are literally pouring in – but there’s no way to pay for the inventory, human capital, and other fulfillment costs that come along with rapid growth.

Businesses must establish a reliable source of financing or business capital prior to reaching this expansion phase – or else a wildly popular company may face extinction due to an inability to meet demand.

5. No flexibility to meet market demands

Just ask RIM industries – the maker of the Blackberry brand of cell phones. They went from nearly 100% market share of the business mobile phone market in the early 2000’s to about 0.1% in 2017.

Here’s why:

They failed to listen to consumer demand, they largely ignored the transition to touchscreen technologies, and they remained stoic and inflexible when asked to simply get better and evolve.

Businesses of all types must evolve to survive – otherwise, they’ll simply become irrelevant as the tastes of the market change.


Owning and operating a small business can be incredibly rewarding – provided you steer clear of the most common pitfalls faced by entrepreneurs today.

Take heed of the five points above, and continue to charge forward with a clear and passionate vision for your own small business.

Market online, find a business capital partner who will help you navigate the financial dilemmas so common to small business ownership – and make sure that you listen to your customer and adapt to an ever changing marketplace.

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