What are the top 10 reasons small businesses fail?
10 reasons why small businesses fail
There are a large number of small projects that fail shortly after their establishment, and the reasons for this failure are often attributed to the lack of experience of the owners and their lack of management and marketing methods. While economic advisors point out that there are other simple reasons that, in an unexpected way, affect the chances of success of any project. What are the reasons for the failure of small and micro enterprises?
1- Blind imitation
One of the most common mistakes is when someone sees that someone else has succeeded in a project and therefore believes that he will succeed as well, and all he needs is to form or search for capital, and start directly with the practical steps and implementation. Most of the small projects that are based on imitation and simulation are often doomed to failure.
2- Lack of vital information
Lack or lack of vital information necessary to translate the idea and ambition into a successful project that is able to withstand and grow. As well as marketing information about the target consumer and competitors in order to build a successful marketing plan. Often the small business owner is unaware and aware of the importance of these details and may ignore them and open his project based on intuition, speculation and improvisation, and his success becomes a mere game of chance.
3- Excess capital
It is obvious that the small amount of capital gives the project a narrow space for work, which may reduce its chances of success. But what most people don’t know is that excess capital often has a bad effect. How do? When the capital is large, the owners of small projects tend to spend it left and right and focus on marginal things and appearances (luxury offices, for example) and get distracted from the basic things and the first goal: the success of the project.
4- Insufficient liquidity to continue
Money is the lifeblood of any business or commercial project, no matter how small it is, and one of the reasons that kills a project in its infancy is entering with too little capital that does not enable its owner to face conditions or seasonality.
5- Not separating project resources from personal resources
A successful project requires financial management according to sound foundations. Business owners and small projects often confuse their personal resources with project resources, and do not separate between their personal expenses and project expenses. Thus, financial and accounting mismanagement is one of the reasons for the failure of small projects as well.
6- Resorting to relatives and acquaintances
The method of selecting the work team will determine whether the project will succeed or fail. Employing friends and relatives without taking into account the factor of skill and experience in the field of project work is a major reason for the failure of small and medium enterprises.
7- Neglecting the marketing feasibility study
The marketing aspect of any project is crucial to its success. Marketing is a science and art that has begun to show its importance in our market recently. Marketing, in short, is based on studying the desires and needs of the market sector that we want to serve and studying marketing opportunities in advance, then we satisfy these needs. Neglecting the marketing side has become, at the present time, another reason for the failure of small projects.
8 – Lack of clear vision
The lack of a future strategy for the growth and development of business and the upgrading of the small business through research and evaluation of opportunities and alternatives is one of the most important factors that lead in turn to the failure of the continuation and survival of the small business.
9- Vanity with the first success
Many small projects succeeded, so the owners assumed that the situation would continue, and this led to stagnation, inaction, negligence, and arrogance at times.. We are in an era in which the market changes and consumer tastes change very quickly, and a strong competitor may appear that provides better services and prices, and the result in this case is clear.
10- Excessive optimism
When signs of failure of some projects appear, the owners insist on continuing and continuing, and often the reason for continuing the project is optimism about an upcoming opportunity, or an improvement in the situation without that optimism being linked to facts and studied data or emergency market conditions that will change quickly according to confirmed information, which is what This leads to the continued depletion of its financial resources and may end up accumulating financial debts that require several years to be repaid.
These were the reasons for the failure of small projects, and knowing them will help you avoid making common mistakes that may seem simple. Therefore, you should take care of all the details of your business and your project, big and small. Let continuing learning, persistence, and persevering work be your weapon to overcome all obstacles and overcome all challenges, no matter how difficult they are.