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6 Common Reasons Why Businesses Fail


6 Common Reasons Why Businesses Fail

Every business, no matter how big or small, can end up as a failure. Indeed, being a business owner is not for the faint of heart. On the contrary, with threats lurking around every corner, running a company requires a lot of bravery and self-discipline.

While some entrepreneurs can instinctively avoid getting in trouble, others constantly have to be on the lookout for potential issues. Whichever group you belong to, knowing the most common reasons why businesses fail can help you keep your business up and running for many years to come.

With that being said, let’s take a look at what perils you should be especially aware of when running a business. From lack of cybersecurity to financing hurdles, there is a lot to unfold. Let’s get started.

Lack of Cybersecurity Awareness

There is no denying that we are moving towards a “smart” world, where smart devices such as smartphones and other internet-connected objects are doing more than ever before.

On the one hand, this is great news for businesses since it means that they can sell a wide range of IoT-related products. On the other hand, however, it also means that criminals will be able to steal your data much faster than before.

As a result, you should always be aware of your data’s safety. To do so, experts from Bulletproof – a cybersecurity company – recommend making sure that all of your employees have strong passwords and use two-factor authentication wherever possible. You also need to check your cybersecurity systems often and always be on the lookout for new safety solutions.

Failure To Plan for the Long Term

Business owners often make the mistake of focusing exclusively on short-term plans. After all, when you’re trying to grow your business and keep up with the competition, it’s easy to forget about long-term planning.

However, you should never lose sight of the future. Your short-term goals should always be based on a wider perspective – for example, expanding your business, looking for new markets, or hiring new talents. Moreover, you should review your plans regularly so as to track progress and make adjustments if necessary.

Poor Leadership Skills

In most cases, when a business ends up failing, poor leadership skills are to blame. Indeed, without effective leadership, it’s only a matter of time until your company gets into trouble.

For instance, when you’re running a small business, you need to be able to keep an eye on all departments at once. Otherwise, issues that affect your company’s productivity could easily pass you by.

In addition, good leaders are also likely to keep their employees happy. If your employees are not satisfied with their work conditions, chances are that they will take their skills elsewhere. And once good employees walk away, it’s only a matter of time before your company fails.

Making Bad Business Decisions

When running a business, you will constantly have to make tough decisions. However, whether these decisions will benefit or harm your business depends largely on how well you spot potential problems and find solutions for them in advance.

For example, if you’re thinking about expanding your business or hiring new staff members, it’s vital that you do sufficient research beforehand. Otherwise, you may end up making bad hires or choosing an untenable location for your company’s headquarters. In either case, your business risks failing.

Lack of Market Knowledge

One of the biggest pitfalls that many entrepreneurs fall into is a lack of market knowledge. In fact, while most new business owners have a general idea about their industry, they don’t always know their target audience well enough. As a result, they may end up overlooking potential issues that could threaten their company’s survival.

Moreover, if you don’t know how your industry works, then you will struggle to find potential points of differentiation and growth. In other words, without sufficient market knowledge, your business may not stand out from the crowd and will have a hard time gaining traction.

Poor Financial Management

No matter how good you are at running your company, if you don’t know how to manage your finances well, then you are likely to fail. When it comes to running a business, there’s a lot going on at all times, and it’s easy to lose track of where your money goes. And then, problems appear. For instance, if your business spends more than it makes, or if it needs an influx of cash but can’t raise funds, then you may be in big trouble.

When it comes to financial planning, one of the best things you can do is establish clear budgets and stick to them as closely as possible. Also, if you make a habit of keeping track of your finances, then you can quickly spot any issues before they develop into bigger problems.


Business failure is a common yet very unpleasant experience. Not only do you lose money, but you also lose the time and effort that you have put into your company’s development. At the same time, business failure happens for many reasons, and it’s impossible to predict which one can strike next.

Financial issues, data breaches, lost employees, market changes – these are just some of the things that can make your road to success a lot more challenging. However, by making sure that you recognize the most common reasons why businesses fail, you can increase your chances of running a successful company. Look out for potential problems, deal with any issues at an early stage, and make your next – successful – steps.

Greater Alliance supports small businesses

Are you a small business owner? We want to help keep your company thriving! Give us a call at 201-599-5500 Ex 290 or stop by Greater Alliance Federal Credit Union today to ask about our business banking services and business loans that can help your business grow.