Reasons Why Small Business Fail and How You Can Avoid Them

Many entrepreneurs have dreams to start their own company and be their bosses. The great thing about living in this day and age of almost limitless potential is that any idea and company has that possibility to achieve success. 

But there are a few things that you need to consider when starting a company to make sure that you aren’t setting yourself up for failure from the start, but prepared and ready to work to succeed.

Poor Inventory Management

When it comes to running any business, if you aren’t providing a service, your products and inventory are at the heart of your transactions. They are the single determining factor of how much you will be making. If you don’t have a system in place to properly organize and systematically track and order new products, your company is at a huge risk to fail. The reason proper inventory management matters so much is that a good system will ensure you have the products you need when you need it and that your shelves and store are never out of stock. Your system should factor in a reorder point formula that tracks things like your highest selling products, your average daily sales, and the delivery time for those products to ship. This will keep the right amount of products that generate you the most revenue on shelves, and in the back, without having to worry about running out or worry about having too much unmovable stock. By having the right stock, your business will continue to run at peak efficiency, increasing your chances for success.

Lacking Structure and Organization

Aside from inventory, your business needs to be running smoothly at all times. If your company has more needs and demands you can handle, you need to ensure that you have enough personnel to handle the workload. This can involve having the right system of management that will be responsible to handle their roles independently and as a team, reporting to you and others they work with, to keep your company and brand going. This structure needs to be properly organized so that you know that the right information is being communicated to be on top of things like your employees, schedules, and inventory. A lack of structure can be quicksand and sink any potential growth for any brand.


Inexperience can be a big factor that determines the success or failure of a new small business. It is important that you have a good knowledge of the industry that you are opening up a new brand or company in. You need to understand different aspects of the clients, your area, the potential for success, the possibility of failure, how much room you have for expansion, what types of obstacles to expect and be prepared for. If you aren’t aware of everything, jumping into a fresh market can be overwhelming. With small businesses, their investment may not have the time to grow or have the opportunity to be patient and play the long game. Lack of immediate success can be detrimental so it is important to have as much experience as possible.

Change in Growth and Market

With experience and knowledge of a market, your chances of success increase. But with success for your company, the next phase brings the chance to grow and the potential to expand. If you aren’t careful about how you grow, you might put yourself and your company with more debt or responsibility than you are ready for. You may be tempted to take on more clients, make more purchases on upgrades, take on more inventory and projects, but if you find that you are committing to too many things, you can risk things like lower quality, longer than expected production times, unexpected delays, and inevitably unsatisfied customers. Don’t let your company fall victim to trying to grow too quickly or not being prepared and organized with everything when it comes to brand expansion.  

Debt and Loans

One thing that can be a big problem for many up and coming brands and companies is that their aspirations are so high and expectations to succeed put them way over their heads. They have dreams of fast development, quick growth, and immediate success. This can cause trouble if they take out more loads and go into more debt than they can handle before they even have their company running. Yes, in most cases, you’ll have to take out loans to cover costs. But it is important to have a plan and scope of your company to factor these in with your costs, and have a strategy to pay them back. If not, your company will be doomed from the start.

It can be difficult to start a company and brand, there are so many things that you have to worry about. But that’s the thing about running your own company, the work, the understanding of the risk makes the success worth that struggle. It isn’t just about being passionate when it comes to your business, but your knowledge and understanding.


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