Why Most Small Businesses Fail

Starting a small business is the classic American dream. It shows determination, grit, leadership, and innovation, all quintessential American values. Unfortunately, up to 90% of American businesses fail. Learn about some of the reasons why and you’ll be one step ahead to avoid these mistakes.

Appropriate Funding

One of the biggest reasons businesses fail is that they run out of money before they are able to create enough traction to turn a profit. Accurately estimating your funding needs is a very important component of starting a small business, and your initial loan or investment amount should include a buffer for emergencies. Unexpected expenses can set you back and create a shortage before you hit your goals.

Doing the Research

Having the right idea at the right time and making it available to consumers at the right price is crucial to your success. No matter how good your idea is, if the marketplace conditions don’t exist for adoption, if you’re unable to reach your customers with it, or if you can’t manufacturer it at a profit, you’ll struggle to get it off the ground. You also need to know who your competitors are and make sure that your business can offer something they don’t. Your pricing structure also has to be researched and tested.


You have to be able to reach your customer convincingly enough that they’ll reach for their pocketbook. Identifying where and when to reach them will be key to your success. Getting the message right the first time is also important. You can take out billboards across the country with your company name on them, but if there’s not enough information there to pique anyone’s interest, it won’t matter how many people know your name.


It’s the oldest real estate advice given, but location isn’t just about where your business is located – it’s also about where your customers are located. For a small business, being in the most popular place in your city isn’t going to help if it’s impossible for your customers to locate you or difficult for them to park. Location is important for web-based businesses as well, as the principle is the same. Your customers still need to be able to find you.


No matter how good your idea, funding, and marketing are, lack of leadership can mean that your employees aren’t inspired to do their best work, critical decisions go unmade. The process of hiring is a critical skill, but even hiring the best people in the field will fall flat if you aren’t a strong enough leader to listen to them and take their advice.

Although there are many risks associated with starting a small business, the rewards can be great. Stay one step ahead by avoiding these common pitfalls.


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