The 3 Main Reasons Why Business Fail

choose success

A painful statistic pulled from a study by Michael Gerber, author of The E-Myth,shows that nearly 80% of new businesses fail in the first five (5) years. Here is a compiled list of the top three reasons why businesses close their doors, and how to avoid that from happening to you.

#1:Poor or Lacking Leadership

I know this one kind of hits home, but it’s true. The leader or leaders determine the direction of the business, because they make the decisions. Everything from where to spend, how to target customers, and daily operations is on the back of the leader. Great leaders constantly learn, plan and execute, even when under pressure. They aren’t afraid of making mistakes, and when they do, they react, execute and take action.

#2: Bad/No Marketing Plan

As the legendary management consultant Peter Drucker said, business all boils down to two things – innovation & marketing. Remember, marketing generates the leads, and then sales closes them. No matter how cool your widgets are, if the world doesn’t know about them, then you’re on your way out of business.

What does your marketing plan include? It should be clear and concise enough to write down in two or three sentences. If you find it complicated or too complex, it may be worth revisiting.

If you can’t explain it simply, you don’t understand it well enough. Albert Einstein

#3: Lack of Access to Capital

When was the last time someone told you their business failed because they had too much money? I suppose some business close because they don’t spend wisely, but that’s another article for another day. Basically, a business owner has to find the balance between leveraging the capital available to them, without over spending and getting into insurmountable debt. When people wisely use their funding and capital, then they can absolutely grow their business and add value to their company.

There are certainly many, many reasons for business failures, but these are the three common reasons that I have found. The goal is to find a model that works. It’s not always you first idea. If you’ve had a business that didn’t succeed, then join the club. Just don’t give up. Your successful business might be the one you haven’t started yet.

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