9 Reasons Why Businesses Fail

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The reasons why businesses fail are many in number. They are the complete opposite of the reasons for business success. There are different types of business failure and knowing how to avoid business failure will go a long way. You must understand that no business is failure proof, you just have to make the right moves. Here are 9 reasons why businesses fail.

Bad business plan

When you fail to plan, you have planned to fail. How many times have you heard this line? You are going to keep hearing it because it is true. Every successful business runs on a plan; however, no plan is completely crash proof. A good plan will only cushion the fall with a contingency plan. A business plan is the foundation of a business. It is upon that plan that your business will be built. Not having a plan is one thing but having a bad plan is another thing. With a bad plan, operations are bound to fail because at each step of the way you may find bullet wounds in the legs holding your business up. Sometimes it is not immediate, the repercussion may come after many years. Some people are also unaware that a business plan is not up to par, hence do extensive research and consult an expert.

Poor leadership/ management

For a business to succeed, it must be effectively managed by a leader. There are different levels and types of management in a business, however, poor management will drive your business to the ground. Leadership is important to a business because your subordinates must support you and the common goal, for the business to attain success and growth. A leader must be able to make good decisions most times which must be unbiased in terms of policy enforcement, financial management, incentives, remuneration, branding, promotions and the likes. Leadership is not a one-day thing, as a manager or business owner, it is beneficial to teach and learn from others.

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Lack of capital

No business can stand without capital. Most times, the lack of capital is stated as the root cause of business failures. It is important to see capital as unimportant in business because transactions operate with capital, maintenance is funded with capital, salaries are paid with capital, resources are acquired with capital and many more. financial stability is a requirement and a profit surplus is the goal. Enough capital may seem like your large pool of savings, but operational costs will eat deeply into that purse, hence, you should never depend on your savings.reasons why businesses failreasons why businesses fail

Poor communication

Poor communication is one of the reasons why businesses fail. Communication itself is the bedrock of man’s existence. Everything operates on communication, the same way the brain sends a message to the mouth to chew to begin the digestive process is the same way you communicate your value to your prospective clients in order to close a deal. Communication is the means for millions of ends. Communication brings about understanding and places all participants on the same page. For a business to succeed, every stakeholder must be on the same page. When arms of a business function without proper communication with other arms, it slows down productivity and causes conflict. It also gives the business a bad name.

Inadequate knowledge of the industry


Before venturing into business, it is only sensible to have substantial knowledge of the business and industry. One without knowledge of the business will not know the tenets of it talk less of how to run it. knowledge will help you understand how the business works and what to do in business, an ignorant person will make ignorant business decisions and would also be cheated out of his/her own deal.

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Bad customer service

Nothing irks customers more than bad customer service. Your customers are the reason your business exists, though some of them can be demonic, the customer is always right. Sometimes, good customer service makes up for the bad experience but having a generally bad system is one of the reasons why businesses fail. There are many parts to customer relationship management, however, customer service is one of the most crucial parts. This is because it is that service your customers will talk about. No system is perfect and sometimes, a customer may need help finding a solution, if handled rudely, sluggishly or poorly in any form, it gives the customers a negative perception of your business. Poor customer service may be the single reasons customers may no longer patronise your business and this will cause the business to fail.reasons why businesses fail

Lack of access to resources

A good business must have access to resources, a lack of this will put a strain on productivity and supply. The business will not be able to meet up with the market needs which will lead to a decline in sales. Also, the lack of access to resources will incur more cost for the business, which is generally uneconomical. It will make the business almost not feasible.

Wrong location

One of the factors to consider before starting a business is the location. The location of your business must be strategically chosen to benefit the business. Your business location must be accessible, near your customers and your needed resources. Using the wrong location will break your business because your target audience will not be reached. For instance, a chandelier retailer won’t do well situating his/her store next to a farm by the countryside. A better location would be in the commercial part of the city, in a mall or on a commercial street. A lot of businesses are in horrible locations, yet the owners why there is no progress.

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There are different forms of business expansions, it could be a workforce expansion, operation space, capital etc. expansion is one of the attributes of business growth, however, overexpansion is also an element that could cause your business to fail. Believe it or not, some businesses are better left small and sometimes, over expanding will be what will break your business. Expanding in a hurry is also part of it. Your business needs stability. As much as it is essential to move with the tide, rapid or not, sometimes you have to make the tide move with you. It is easy to confuse growth and success with how fast your business can expand, however, it is important to note that often times, it leads to bankruptcy. A business is not just one shot caller, there are other people who have to follow the shots. When they cannot keep up, the business fails.