What Are The Common Causes Of Business Failure


Your business is failing and it might still be a bit confusing for you or you just haven’t realised it. A lot of  businesses fail or go under because of so many reasons. Sometimes we do not see those things as things that could crumble our businesses and just continue on our path but actually, they can.


Here are 11(eleven) common causes of business failure:

1- Wrong  Mindset As A Common Cause Of Business Failure:


 With the surge of entrepreneurs registering businesses day in and out, So many business owners who should have just worked for someone else decide to start a business without knowing anything about owning  and running a business. 


They hear about businesses that are topping the world, trending and making lots of money and they definitely want to be like them without knowing all the hardships they went through to get there.





As a business person you should always have a persistent, consistent, smart working and hard working mindset. 

If a decision you make in your business turns out to not support the growth of your business, you should source for ways to make it better and move on.



What are the major causes of business failures



Businesses don’t start when you finally have them kicked open, it starts with you you as a business owner opening up your mind about enduring all the hardships and setbacks you will encounter in your business because no matter how well you convince yourself about them, they will definitely come and you have to overcome them with your winning mindset.


2-Poor Marketing As A Common Cause Of  Business Failure


 According to Allan Lib, writer of the one page marketing plan, marketing is the biggest leverage point in any business. Everything about any business screams marketing. Say you newly opened a grocery store in this century without a sign post indicating your business type, social media hype, radio jingles, adverts on different digital platforms or even word of mouth.


Most people will most likely not come to your grocery shop except those excessively curious ones that are curious about what’s going on there and most of them that go there out of curiosity won’t buy anything. But if you have any of those things marketing your brand, everyone that comes around your grocery store comes with an intention.




The market, whatever industry you are in right now is already competitive and you wouldn’t want to close down just because of other competitors .


Your team will need to lay down strategies and tactics to follow your target market and see to it that they notice your products amidst the competition in your industry without exceeding your marketing budget as you are still a growing business.


3- No Business Plan/ Unfollowed Business Plan Is A Common Cause Of Business Failure


To make sure your business is not part of the many businesses that fail every year, you should plan your business and follow it strictly.


We all know about the saying”failing to plan equates planning to fail” , we can all agree to the truth in that. 


Not just failing to plan, If your plans are not feasible, it’s also going to be a problem.

Some planners just write out plans without checking the feasibility of those plans for the business year and it ends up crumbling the business in the long run.


4-Lack Of Funds As A Common Cause Of Business Failure:


We can all agree that the error message when you are trying to do a transaction using a point of sale machine or an automated teller machine and it says “Insufficient funds” is really annoying ” that’s how annoying it is for a business that lacks funds.


Money ranks up with oxygen, as long as you are breathing, you need money, so does your business need money to generate more money.


You need money to make more money and also maintain a stable business . From your business plan to > marketing > employing credible and hardworking employees > Investing in your business, they  all require money.




5- Not Having A Clear Brand Focus


So many small business owners don’t define their brand goals and objectives before they start their businesses. They just start and target everyone without realising that their product cannot be for anyone and the competitive nature of the market takes its full course and pushes them aside.


Having a clear brand focus and goal helps you avoid business failure otherwise you keep running around while the whirlwind takes you and your business for a run. Your goal and business focus should always be at your fingertips because you will keep reminding yourself and your team so you all  don’t lose focus.


6- Mismanagement Of Funds:


So many small business owners do not separate their personal  funds from funds for their  business.

As a business owner, every expense that is not related to your business shouldn’t have anything to do with your business account, It should be spent from your personal account.

Your business account should be used to fund your business, pay your employees, invest in your business and do everything related to your business only.


You can always use accounting softwares to track how money goes in and out of your business account and keep proper records.


7.Lack Of  Entrepreneurial And Management Skills


A business owner is supposed to be equipped with entrepreneurial skills to help his/her business growth. 

These skills are not in borne as most of them are learnt but entrepreneurs tend to adapt to them very easily. Examples of those skills are listed here.


8. Too Much Expectations


Too much expectations can ruin your business and cause it to fail.

A lot of people think that the moment you start a business, everything is just supposed to take off from there. For every business owner, you need to know this; successful businesses  don’t just happen, you need to make them happen with your consistency, discipline and the amount of positive work you put into it.


Starting a business and expecting it to make one million the next month is almost impossible and setting very high expectations every day for a new business will only kill your morale and that of  information thereby causing your business to fail. 

As a business owner, you should take your business one day at a time, setting realistic goals and trying to achieve them step by step.


9. Investing Without Proper Information Can Cause Business Failure


Making investments without proper information is a means to fail in your business. Investments talked about here are not just money investments.

Making bad investments like producing or selling sub standard products, employing people that do not meet your business standards, investing in things that won’t increase the income/profit of your business thereby increasing the chances of failure in your business.


10.Not Choosing A Great Location(For Offline Stores Or Physical Location) As A Cause Of Business Failure


For a business owner whose job is to sell products from a physical location to his/her customers, a strong determining factor of his business failing or succeeding lies in the physical location. 


For some business owners, not choosing a good physical location can be the cause of their business failure.


 Taking a stationery shop as an example, a stationary shop owner would need to rent or buy a store close to  schools or close to offices so as to get patronage from pupils, students, parents and even office workers so as to increase their sales . 


While choosing a physical location, a business owner should look at the following factors ;

  • Proximity to the source of raw materials
  • Proximity to the customers (target market).
  • Availability of raw materials
  • Available space 


For one running a car repair shop, he/she would need to get a workshop with enough parking lot or space to accommodate lots of car owners coming for car repairs or servicing of their different cars.


A good location is a great  factor to look out for to avoid business failure for businesses that are not done online.


11.Not Having A Proper Business Structure


Before you start any business, it is right you have a proper business structure written down somewhere not just in your head, to reduce the chances of business failure .


As a small business owner, you need to write down  or your other managers need to put down what the structure should look like, not a building structure, but different job positions, their job  descriptions and everything their job entails to pave way for  the smooth operation of your business everyday and to avoid not having a proper business structure being the cause of your business failure.



Linda Orjiakor is a serial entrepreneur, content writer and professional blogger with years of blogging experience. She's passionate about helping business owners make the most out of their businesses, leveraging their online space and getting the best out of their online platforms, she also helps bloggers scale their blogs into a real business on her new blog, www.lindaorjiakor.com. She has written articles also published on authority websites like BellaNaija >> https://www.bellanaija.com/2021/05/linda-orjiakor-killing-the-shame-associated-with-menstruation/

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