7 Reasons Why Businesses Fail

7 reasons why businesses failAre you doomed to failure?

Over many years, industry and economic experts have agreed on the main 7 reasons why businesses fail and I myself have conducted some research into this area and would like to share this with you.

So what are the 7 reasons why businesses fail?

As an accountant, I want your business to succeed – why? Well, purely for selfish reasons but if you survive, grow and succeed then I will too as you remember the bread and butter of any accountancy practice are the clients. So it is in my interest to see you succeed and to help you as much as I possibly can to achieve this success.

Failure occurs mainly due to planning – or rather lack of it. I am going to put planning at the top of the list as I feel that all the other reasons are also a result of lack of planning.


A business needs to be planned! You wouldn’t get married without planning it first so why should your business be any different? To begin with, I encourage the creation of a Business Plan to cover the first three years of the businesses life. This three year plan is then broken down into years and then months so you have Plan Year 1 then months 1 to 12. Business planning is an exhaustive and time consuming exercise which is why most people fail to do it and then wonder why their business has failed.

Wrong Reason

Another main reason for businesses failing is that the owner starts it for the wrong reason. They think they will become rich overnight, or have more time with family, have fantastic holidays, have no-one to answer to etc. These are all myths and if you start your business believing this then you have already set yourself up for failure before you’ve even started!


This is quite often a major reason for failure – you set your business up in an area because there are no other businesses of that type there. So ask yourself the question, why not? Why do you find many restaurants, takeaways, clothing retailers etc all in the same location?

Poor Management

This is in no way critical of you, the business owner. Simply put though, you lack the necessary management skills to build and run the business (unless you come from a senior management background). This is not your fault! What is your fault, though, is not tapping into the resources that are available to either make you a better manager or to bridge those gaps where you are lacking. As part of your business planning, you should prepare a SWOT analysis on yourself; be critical and recognise your shortcomings so you can address them.


During your planning stage, you need to be realistic about financing – how much money do you need not only to start the business but to also provide an income for you too. My recommendation would be to try and start the business with as little capital requirements as possible. It is almost impossible for a new businesses to raise finance; the banks will lend money if you can prove you don’t need it (or if you provide huge collateral) and investors want a cast iron return on very little risk. Look at the purchases you need to make and don’t spend extravagantly.


Quite simply, you have started your business, it’s doing well but you over-expand either in terms of premises or staff; both of which can have crippling consequences or push you into failure without you realising. Expansion is good and it means you are doing something right but you need to carefully analyse which areas of the business need to be expanded. Are you failing to meet customer needs? Are you running out of storage space? Do you require capital expenditure?


Another main reason for failure; people simply don’t know you exist! In this day and age, you need to have a strong online presence; make full use of social media and make sure you have a website and keep these updated regularly. Make videos and start a YouTube Channel. Attend networking groups (but resist to urge to pay huge amounts for a membership on the basis that they will get you loads of business – this rarely happens); go to Chamber of Commerce meetings and events. Essentially, get yourself out there, get your name about and become the expert in your field.

I hope this blog post has given you something to think about and please remember, I am one of those resources available to help you and your business. Give me a call now on 01794 521300 or complete the Contact Us form here.

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