Top reasons businesses fail


    Top reasons businesses fail

  • 1 No real market need for the product

    The no 1 reason for business failure is starting a business without finding out whether there is a real need for the product/service. Some entrepreneurs start businesses based on their gut feeling or passion, but unless there is a real market need, the business can't succeed.

  • 2 Poor execution

    Sometimes businesses with great ideas and real market need fail because of poor execution. If the business idea is implemented poorly or the execution isn't done right then this great business idea might still fail.

  • 3 Right business, wrong team

    The team working on a business is as important as the business idea and the market need. If the team isn't skilled, passionate and dynamic, the business will certainly fail even if the product is great. Selecting the right team is one of the most important things you should do.

  • 4 Loss of enthusiasm

    Giving up is among the most common reasons for business failure. So many entrepreneurs give up a few months or even weeks after starting their businesses. Not being psychologically prepared to handle the stress and the pressure associated with a start up can lead to giving up.

  • 5 Money runs out

    So many businesses shut down after running out of resources. Whether those businesses were self-funded or had raised cash, the result will still be the same if cash runs out.

  • 6 Inability to generate cash

    This is very common with tech start ups that grow quickly then realize that they don't have a good business model to make sales or generate cash. Make sure you already have a cash generation plan before you begin even if this plan is a long term one.

  • 7 Poor market research

    Sometimes it seems like there is a strong market need for certain products, but when the market is examined on a deeper level it turns out that this need is already satisfied. Poor market research can lead to business failure.

  • 8 Failing to innovate

    Kodak business suffered a lot with the invention of digital photography. Failing to innovate or to adapt to disruptive technologies can lead to fatal business failure. Companies that used to sell typewriters suddenly found themselves facing a new disruptive technology, the personal computer.

  • 9 Failure to scale

    Some businesses do everything right but fail to scale. The friendster.com example is one of the most popular cases where a promising social network failed because it didn't mange to scale correctly as it grew.

  • 10 Wrong location

    This factor becomes very effective in retail businesses. The location of a store is a vital factor for success. Poor choice of location can lead to business failure even if the business has great products.

  • 11 No one knows about the product

    Great products don't sell themselves. If no proper marketing is done, then nobody will hear about that great product and the business will fail.

  • 12 Failing to differentiate

    Customers are constantly bombarded with new products everyday. The business that fails to differentiate itself from the competitors fails to stand out, and shortly after gets swept out by the ones that do (See why branding is so important for business).