Why Do Most Small Businesses Fail


I have seen many small businesses thrive and many fail. Why do most small businesses fail? Starting your own business isn’t easy. Depending on what you are starting up it could potentially be a nightmare. Hair pulling, stressing out, or a bit more than you can chew.

Let’s take a look at what I’m talking about.

Not all small businesses come to this demise.

Management Skills

If you ever took some business course you know what it takes to run a business. You need time management skills, how to delegate workloads, management skills, and a group or team to run your business smoothly. Check your ego or pride at the front door.

  • Have a plan in place. Creating a business plan to help you move ahead. Knowing that you have a plan you can go forward in running a business. When you apply for a loan for your business the bank would like to know how are you going to pay them back. How you plan on making profits.
  • Hire the right employees. Only you know who they are.
  • Stay organize. The worst thing is killing time by not knowing what to expect. Where to proceed.
  • Enforce your company’s work ethic and code of conduct. Any procedures that your company needs to abide by. Newer generations company we hardly see this anymore but it’s good to keep it in mind when your employees are running amuck.
  • Set goals. Knowing what needs to be done to make your company runs smoother. Having a deadline makes you more efficient.
  • Set the culture of the company. It’s very important to know what kind of company you are making. Is it going to be an open door policy or closed-door policy?
  • What is the chain of commands? Do you have one? Be transparent with your employees. Weekly staff meetings to inform them of the company status. Do it by groups, shifts, department, or memos. Whatever works.
  • Cross-train your employees. The more they know the more they can help when a person is absent.
  • The most important is COMMUNICATION. Always communicate so everyone can be on the same page.

Good Management Team

A good management team involved people with professional skills. I’ve learned the hard way. I will probably never do that again. Hiring family members to work for me.

There are so many distractions. One there is a major party like weddings the company close for that day. Funerals, birthdays, sickness, and fighting. Oh, the fighting. Oh and the drama. You guys there’s so much drama that you don’t need to watch TV anymore.

The stress in the team that no one wants to work but wants to get paid. What? “You didn’t work this week why would I pay you?”

Good management starts with good non-family related personnel. To have a good management team it consists of:

  • Good manager.
  • Engineers
  • An accountant.
  • Legal department.

When you have a good manager he would need a good team leader. Having a good leader the manager can concentrate on getting more work to the company. Great leaders are doers and a motivation speaker. Lead by examples. It’s teamwork going for the same goals.

You need your engineers to help access the foundation. For electric power, phone lines, and power grid for enough power to run your business.

An accountant to verify you have enough funds and when you can use your money.

The legal department is not only for lawsuits but for what you can and can not do with the premises. It also works as your human resource department. For complaints, harassment, or payroll.

Different Vision About the Company

Some small business failure is due to a different vision of where the company is heading. When both partners are taking the company a different way.

One wants to upgrade the company old technology to newer technology. One is afraid of change.

Here an example of a different vision. There is a couple who, one is a dreamer he wants to grow his business where he can be rich. That’s the purpose of owning his own business, correct? There’s nothing wrong with that. However, he’s complaining that they aren’t making enough and they should expand.

The rational one thinks that they are making profits but not enough to expand yet. She wants to keep the company for another year to see more profits before they expanded because what if business slows down when they barely making a profit.

They argue their sides and it makes sense. She wants to wait to make more profit. He wants to expand to make more profit. This is a risk that they are facing. Push comes to shove and they closed shop because they are heading in different directions.

Different visions lead to shop closure.

Poor Business planning

New product

Some of the starting business doesn’t have a S.W.O.T analysis. What is SWOT Analysis? It is a strategic planning technique for a business to understand their:


How marketable you are out in the real world? When you set up your business will it be interesting enough for your customers? You already know that you will attract a lot of people. Have confidence in your product. For example, we offer the best GPS monitoring devices out there at this moment.

Our staffs are crossed trained to run any devices and stations. We have the best customer service around, and our staffs are happy. A lot of small business don’t understand that happy staffs equal happy customers.


What is your company susceptible to? What can go wrong? What does your company needs to improve on and to maintain competitive with others that are doing the same things you’re doing? Get ahead of the crowd so to speak.

Is there enough money, capital you need to upgrade your system, new work vehicles for your staffs, and is the location suitable to work in?

Are you planning on hiring more management to run the company? How would you divide into departments sections? For example, managers, supervisors, leads, and subordinates. These are things to keep in mind and have funds for.


This is probably you want to pay attention to because its the external factor that will contribute to your company’s success. if you don’t pay attention and stay ahead of your competitors they will win that contract or go to another competitor. Of course, lost your opportunity.

How’s your customer satisfaction skills? How would you compete for the next contract? Keep the buyers on your side. Make a lasting impression that they don’t need the other low-quality products and stay with your high-quality products.

Are you well-liked by your peers? Do they think highly of you? Is your product is all they need?

What events or actions you need to make to impact your company positively?


This is something that it’s beyond you. Things that are out of your control and you must be aware of it. For example, are there going to be more competitors that can develop a product that is better than your high-quality product? The behavior of the consumer changes the way you run your business.

Supply and demands what happened if the vendors you use is no longer exists? And other threats as technologies advances further.

These are all internal and external brainstorming you must be aware of your company. Things that must be done to understand how you run your company.

Lets recap

Running a business by yourself is hard. Delegate responsibilities to different departments will lessen your stress. Hire the right people who care what happens to your company and understand that if they do not care then they will not have their job in the long run.

That’s including a team of professionals to help you run your company smoothly. Make sure your department heads and staff are happy aswell taken care off.

Get a S.W.O.T analysis and see where your business is going. Get a good business plan going. Make sure all if more than one person, partners share the same vision.

Communicate better. Be transparent and take accountability.


Learning how to run your company properly can lift some headaches and stresses off your shoulders. Making sure to delegate what is important to different departments meaning you have a better chance of not being a grumpy old person.

Squash the competitors and always strive to be better.

Running a full-time business is always a great thing, if you know what you are doing or if you like to challenge yourself. This my opinion as to why do most small business fail. That’s why I like to run my business online. That is another article.

My #1 recommendations home base business


This is only my opinion. There are many other professionals out there with their own insights. Also from my own experience from seeing my family and friends struggles through. 


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