Reading: Why Some Ventures Fail

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Valuable Lessons

The odds are definitely stacked against small business owners and would-be entrepreneurs. According to the Small Business Administration (SBA), “About half of all new establishments survive five years or more and about one-third survive 10 years or more. As one would expect, the probability of survival increases with a firm’s age. Survival rates have changed little over time.” [1] That’s why it’s so important to understand how and where things go wrong—such information offers valuable lessons on what to avoid. There are six main causes of small business startup failure:

Lack of Planning

Starting a business without planning where you want to go is like starting a car journey with no idea of your final destination or a map to get there; you’re bound to get lost. To avoid this mistake, set a clear goal of where you want to be and how you plan to get there.

Failure to Delegate

Within every business someone needs to focus on the bigger picture and have an overview of everything happening internally and externally around the company. That person should be you, but if your your head is buried in the accounts, you won’t. So delegate and outsource all the tasks that can be done by others, and free yourself to concentrate on the bigger picture.

Unwillingness to Change

As a small business you can’t afford to stand still while your market and the world around you moves forward. Adapt and develop your small business so it’s forward-thinking and innovative, not behind the times.

Forgetting That Cash Is King

A small business needs to monitor its cash flow closely. As soon as it loses track of the money, it’s vulnerable to failure. Plot and analyze your incomings and outgoings to make sure your small business stays on the right financial track. Don’t expect massive profits from the outset, but don’t accept a loss, either.

Lack of Objective Targets

Failing to measure the success of campaigns, products, or services can be disastrous for a small business. Is that PR campaign you’re running really worth the money? Does Twitter really bring traffic to your Web site? Know what to measure, and you’ll know how successful you are.

Failure to Ask the Right Questions

When you’re a small-business start-up, knowing which questions (and whom) to ask is difficult. There are numerous resources, such as the SBA, local economic development agencies, and chambers of commerce, that are great places to start. Part of the process is “knowing what you don’t know,” and such organizations can help you figure that out.

While avoiding these pitfalls won’t guarantee small-business success, knowing what not to do can help you to be proactive and focus on the things you should do.


  1. U.S. Bureau of Labor Statistics, BED, cited in "What Are the Real Small Business Survival Rates?"