Small Business Serial Killers- Why do businesses fail?

‘Small businesses fail because they run out of cash’ is just as helpful a statement as a doctor saying ‘The patient died because they stopped breathing’.
According to the latest Bloomberg research, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months. A whopping 80% crash and burn. But why? Why do small businesses fail?

Here are five of the most common mistakes I've seen small business make that inevitably cost them their success.


Poor Management

Poor management is often cited as the number one reason for failure. Business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring, marketing and managing employees.

Dysfunctional leadership trickles down and affects every aspect of a business’ operation, from financial management to employee morale, and once productivity and morale are hindered, failure becomes inevitable.

When it comes to this issue, the first step to solving the problem, is admitting there is a problem. None of us wants to admit that we suck at managing our own businesses and teams, but unless we do, our businesses are doomed. Learn, study, find a mentor, enroll in training, conduct personal research – these are all things that can be done to improve vital leadership skills.

There must be a strong investment in leadership skills. And of course, this is something even people who have been in business for many years, need to work on. Management and leadership techniques are always evolving. So just because a single management style has been implemented for the last 40 years, it doesn’t necessarily mean that leadership is efficient.


No Website

In an age when ‘Google’ is a verb, having a website is a must. Simply put, if you have a business, you need a website. There is no discussion around that. In 2015 every company should have a professional looking website that enables visitors to easily find out what you business is about, what you offer and how to get hold of your products or services.

Businesses who don’t have websites are likely to be losing clients to those that do. And having a website isn’t enough- it has to look good, create a good impression for the business.

Failure to understand customers and prospects

Many jump into business ventures with the idea of what they want to sell rather than what people need or any specific problems they are solving. In my experience, this is the worst move an entrepreneur can make because complete understanding of the customer is imperative to a business’ success.

Just because a business has an amazing idea for a new service or product, it doesn't necessarily mean that people will be interested or willing to pay for it. Customers hold the key to success and unless they are asked the right questions, success will never be found. What is it that they want? What is it that they need? What pain do they experience that you can lessen?

The key to understanding customers and prospects is in the dialogue a business has with them. A good business will ask them questions, carry out surveys and take their feedback on board.


Failure to differentiate between customers

Unless a business has a single service or product, it will have different groups of people interested in different offerings. And even if it does only have 1 product to sell or only 1 service, chances are that people who buy it are still quite different from one another.

A fitness instructor for instance, technically only offers 1 service. However there are people interested in weight loss, others who need an instructor’s services to help them build muscle mass, a third group interested in getting in shape for a specific event. These are all people who use the instructor’s service, but their needs and preferences vary so the way the instructor communicates with them should be tailored to their specific needs.

This is where segmentation comes into the picture. Segmenting customers into groups according to their needs has a number of advantages. Amongst other things, it can help a business to:

* identify its most and least profitable customers
* focus its marketing on the customers who will be most likely to buy its products or services
* avoid the markets which will not be profitable
* build loyal relationships with customers by developing and offering them the products and services they want
* offer more targeted and personalized messages that are likely to deliver better results

A business will think closely about client base and try to separate them in groups. The criteria could be how they use its services, how often they use them, which particular services they are interested in etc.

To find out more about segmentation (and other awesome marketing techniques), check out our Small Business Growth Formula.


Failure to communicate with customers and prospects

Failure to communicate value propositions in clear, concise and compelling fashion is a sure-fire way to bankrupt a business.

Customers can’t do business with an enterprise if they don’t know it’s there. The business must reach out and communicate the benefits of its service. And it’s not just about communication itself either, the mediums chosen and the content of the messages are just as important.

Print media is slowly dying. Radio and TV? Not particularly practical unless you have a huge marketing budget. Those used to be the ways, now social media and internet advertising and the way. Think social, email, mobile, search marketing.

As for the content, well it really boils down to how well a business knows its customers. What do they want to hear about? What do they want to know? What information would be of value to them etc. Content is a huge topic, so head over to our Content Section of InTouch CRM to see how compelling copy can be written, what to write about and what are the most common mistakes people commit with regards to content.


By eliminating these risk factors, a business is well on its way to success without falling victim to the intimidating 80% fail rate of small businesses in their first year of operation.

Do you run a business? What issues did you face that could have cost you your business? How did you resolve them? I'd love to get your comments and hear about your experiences.



About the author: Didi Zheleva is the Content and Digital Marketing Executive for InTouch CRM- the leading sales and marketing automation provider for small and medium-sized companies.