The top 5 reasons that businesses fail

For the purposes of this newsletter, I’m going to talk specifically about smaller businesses. Across our Success Groups, we work with new businesses and startups through to 1 million pounds per year turnover. From this, we see the main reasons that small businesses fail can share some commonalities with larger businesses and even corporations.

However, in my experience, there are certain things more specific to startups and small businesses, that the smaller business owner is more likely to fall foul of. It’s worth noting that one in five businesses will fail this year. It’s also worth noting that 60% of businesses will fail in their first three years. However, what’s more, worrying is that of those businesses that do survive, the vast majority of those will struggle and not thrive!

Therefore the top reasons startups fail, are actually also the top five common reasons that businesses struggle.

1. Wrong Advice

One of the reasons startups fail is because of the wrong direction and advice. We could also say, taking the wrong advice, or taking the right advice but at the wrong time.

Obviously, if you get bad advice and you implement that bad advice, it’s going to have a negative, detrimental impact on your business, that could potentially lead to an opportunity for failure. However, equally damaging, can be taking good advice, just at the wrong time for where you’re at in your business journey at present. To make the most of your business’ momentum and growth, you want to make sure that you are taking the right advice at the right time, that’s very specific to where you are at in your business today and specific advice for your specific business. A lot of specifics there that could lead you to a successful business.

It can be hard to know what is good or bad advice because rarely do we know what we don’t know and therefore, it’s easy to fall foul of trying to implement the wrong business plan and strategies. We might take this advice from an online guru, a well-meaning business coach or a best-selling business book.

We must make sure that the advice that we receive and certainly the advice that we implement in our businesses comes from a trusted source. From someone that has knowledge, skills, and credibility specific to our business, all aimed at what we’re trying to achieve in our business but relevant to where we are currently in our business journey.

2. Not taking the right advice.

One of the top 5 reasons small businesses fail is not taking the right advice. I see many business owners, even when they are being given great advice that’s relevant to where they are in their current business journey, still not take or implement from that advice.

Sometimes it’s fear, sometimes it’s just reluctance, sometimes, maybe there’s even a degree of arrogance.

But for whatever reason, when you don’t apply the business plan through great advice that comes your way, clearly that’s going to have a detrimental impact on your ability to create a successful new business and again, could contribute to damaging or even creating business failure.

3. Hiding from sales

Smaller business owners will typically find themselves in the position where they are also responsible for the majority of the sales activity in their business, certainly in the early days. However, most business owners don’t come from a sales background and therefore there is often a reluctance to step up into that sales role.

In fact, I’ve seen many business owners do absolutely everything they possibly can to avoid selling. More often than not this presents itself as hiding from sales behind marketing activity. The thought being, if I just do enough marketing, if I just cover enough platforms, if I just do enough activity, maybe even spend enough money, then I won’t have to have any uncomfortable sales conversations.

The longer that you put off stepping up fully into the sales role in your business, the longer you are putting off the success that you can have. And once again, it could be detrimental to the degree of potentially causing total business failure.

4. Not choosing a niche

Competing with everyone is a big one! Niching our businesses, so that we stand out to a smaller number of potential prospects by excluding the majority of the market can be scary. Most business owners resist this absolute essential step toward creating a successful new business. Mostly through fear, sometimes because they don’t know how to, or more often than not because no one’s really explained to them the benefits of doing so.

The benefits of niching are so broad and varied that it’s too much for this article. However, heed this warning, if you starting a business, giving out a general service to the general market, at best, you’re gonna be able to charge general prices.

If you really want the best work, the best clients, and to earn the best fees, you need to be seen as a specialist. You cannot be seen as a specialist, if you are a generalist and therefore being brave enough to let go of the majority of the market to position yourself as a specialist for a small part of the market, will deliver the best for both you and your clients.

5. Not charging enough

The smaller company or business owner often falls foul of not charging enough for their services. There’s a whole host of reasons for this.

One is, as I’ve already outlined that they are a generalist.

Two, it could be their own personal confidence in what they are delivering.

Three, they might not currently have the product to demand that higher fee.

However, failing to charge enough for your products is going to be one of the main causes that your business will struggle and potentially even fail. Charging more is not about just putting on a massive price tag on your product or service offering, it’s about making sure that your product is targeted to a specialist market that values the outcome that you give them and who are willing to pay good money for that outcome.

It doesn’t matter how good you are, what you do. If the people or customers do not appreciate or value the result or the service that you offer, they’re never going to pay decent money for it.

If you want to find out how to avoid making all these mistakes then you can attend my free upcoming workshop on 30th May.

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