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7 Reasons why Businesses fail to stand

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7 Reasons why Businesses fail to stand Are you ready to be that tough and successful business individual, believe me it is compulsory you know the ups and down and nature of other businesses out there, especially your competitors, this article is a combination of different experience, tested and approved. Enjoy as you read.

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You should see examples of failed companies out there this will be below, you could see that after reading this article

7 Reasons why Businesses fail to stand Why do small businesses fail? That’s the million-dollar question. Starting a business is not easy, and there are countless statistics out there about the survival rate of startup companies.

Check this out

According to Bloomberg, 8 out of 10 entrepreneurs who start businesses fail within the first 18 months. A whopping 80% crash and burn.

Here are 10 reasons why small businesses fail.


1.  No Business Plan or Poor Planning

This reason is especially true for brand new small business owners. What you think sounds like a good business idea on paper may not fare so well in reality. (For some hard truth, see the fastest-growing occupations as measured by the Bureau of Labor.)

This doesn’t mean you should ignore your passions. Instead, it means you need to do a little research and business planning.

A business plan forces you to define your Unique Value Proposition (UVP) — what differentiates your project from its competitors. In a sea of food trucks gathered in a parking lot, how will yours stand out? Is it the food? Is it the service? Is it the neon hues and festively decorated truck? Is it the daily social media promotion? Likely, it’s all of the above. Maintaining a sustainable business model requires setting yourself apart from competitors.

Other important considerations include: Who comprises your customer base? How will they buy your product or service— in-store, online, or both? What’s your marketing plan? How will customers find out about your business? What are your cash flow projections? Your startup capital? How far will your cash reserves take you? Remember to factor in both business and living expenses, as most businesses are not profitable during their first year.

2.  Poor Management

2nd reason why a new business might fail. An entrepreneur have power over their businesses, and with great power comes great responsibility.

Management is partly about attitude and mindset — and it does have an effect on your bottom line.

Sometimes small business owners become set in their ways when it comes to doing certain things. This is especially true for veteran business owners. For new entrepreneurs, make sure you don’t fall into this trap. And to be fair, it’s not just business owners. It’s everybody. It’s human nature, and we are all guilty of it at some point in our lives.

Assumption and complacency typically happen when a business is doing well and fall into a false sense of security that your business is operating in the best possible and most productive way. That’s precisely when fallacy swoops in and wreaks havoc if you’re not careful.

These ten reasons should give you a solid understanding of how to turn around a failing small business so your company doesn’t become a failure rate statistic.

3.  Failure to Understand the Target Market

Good planning and MARKET RESEARCH are vital to any business. Never just “wing it” or you’re bound to crash. If you’re setting up a quirky new food or clothing line that isn’t exactly turning heads, you’re doing it all wrong.

If you want to be a smart business owner, you must be able to project the consumer’s wants and needs, and deliver to them in ways that exceed their expectations. It’s not always about giving consumers something unique in the long line of stalls; you must also know the fundamentals of your target market: you would want to know what your target market looks for regularly and how much they are willing to spend. You also need to understand at least how your service fosters customer loyalty.

Besides knowing your target market and what they want, as a growing business, you must also know and anticipate your competition. Gathering and analyzing market information will keep you on top of your game and not blipping below the radar. Ultimately, you want to speed past your competitors if it were a choking race.

  1. Insufficient Or Lack Of Data

Your small business is competing with cash-rich behemoths like Wal-Mart and Starbucks. What do those giants have at their disposal? Data. Tons of data.

Though your market is much smaller, you should still gather as much information as you can. If you don’t have insight into the performance of your business in real-time, it will drastically limit your ability to make smart, data-driven decisions.

For example, you need complete visibility into the revenue you collect and the expenses you pay. Without this knowledge, you are literally flying blind.

On the expense side of the equation, if you want to buy a new line of inventory or make some updates to your storefront, you need to know how it’s going to impact your bottom line. And it’s not just these expenses you need to keep an eye on, but all of your costs.

As a business owner, you need to know what percentage of revenue you can allocate to employee wages, utility bills, or rent so you can set proper targets for cost savings. On the revenue side, you want your business to grow month over month or year over year.

If you don’t achieve your goals, you may want to examine areas of your business where you’re overspending — i.e., the expense side. To ensure your expenses don’t exceed your revenue and turn your business into a failure rate statistic, it’s helpful to know your net income.

First, you need to define your Gross Profit (GP) by taking the Cost of Goods Sold (COGS) and subtract the number from the total net sales. If you’re using a POS system like ShopKeep, you can find reports like these, and more in BackOffice.

The second factor you’ll need in this calculation is your Operating Profit (OP). To find the OP, you need to subtract your operating expenses (i.e., payroll, rent, utilities) from your gross profit. If you’re using accounting software, you’ll easily be able to retrieve this information.

Lastly, you have non-operating expenses. These are expenses that are not related to core business operations like your operating profits, but rather taxes or interest you may have on loans or cash advances. Non-operating expenses are subtracted from your operating profit to yield your net income.

The secret to running a lean business is a long-term, ongoing strategy that strives to eliminate waste to improve efficiency, agility, and quality of business operations — all while maximizing value to customers.

While this seems like a contradiction, doing more with fewer resources, it’s much easier than you think once you break it down into small steps. The ideology of a lean business is built on the methodology of build-measure-learn.

Build. The main idea behind build is that Rome wasn’t built in one day. Nor was Google’s Gmail, Apple’s iPhone, or mega-retailer, Amazon. Businesses don’t start out doing all the cool and fancy things they’re known for today. For instance, Amazon started as an online bookstore, and now they deliver groceries to your and provide streaming music services. The point is these companies started with a basic idea, or in the business world, a Minimum Viable Product (MVP) that they can introduce to the market.

Measure. Next, these companies measured. They measured the results of the MVP during the experimental stage. How did the market respond to your product or business? Did they react the way you expected them to, or was the reaction the complete opposite of your hypothesis?

Learn. Once you have some reliable data measurements, you can then determine which direction to move based on the results of that data. Have you been right all along and now you have the data to back it up? Or did the measurements provide you with some insight into areas you can improve?

To apply this to your small business, you need to go back and look at your business plan. What are you trying to build? What are your goals? What is the bare minimum you need to get started?

Whatever the outcome, know that it is backed by reliable data that you can trust to help pivot your business in the direction that will help it be most successful.

Operating a successful business is not something you can leave up to chance or luck. It takes a clearly defined business plan, strategic operations, and sound financial management from startup and throughout the life of your business.

Real-time data dramatically reduces lag time between data collection to data analysis, thus making your business more agile and responsive to changing trends. And if there’s one thing every small and medium-sized business has over big-box retailers is the innate ability to be agile because they don’t have to cut through the corporate red tape to make changes. They can see the data trends in real-time and respond accordingly.


Are you a match with your colossal competitors? It may all be a long shot in the beginning, but to rise through the ranks, you need to meet the big sharks on the way. The marketplace is tough enough with its numerous competitive businesses each trying to outdo the other. A start-up must learn to start battling tougher and renowned moguls in the industry to at least make a blip in the scheme. This is another reason why HIRING THE RIGHT PROFESSIONALS in your new business is a smart move. Don’t settle for less or swim on the same surface or you’ll never make it to the deeper, greater ends. You should Check out Cbl Media, competing with fellows like,,, Business Daily News and Christianity today. one of the best part is Cbl Media target is youth but other sites are general. so it tops its competitors with the fact that it’s target is the Youth all over the world and not all audience.

Related: How do I advertise on the Internet on a Small Budget? This article will really help you to top your competitors out there.

The market is a fast-speeding train with crates waiting to pound the surface, and passengers that perhaps want to swindle you on your way there. Don’t get choked and maneuver wisely through the passages. This requires a great strategy, critical thinking and planning, and sharp intuition in your every move to rocket past the competition. Really, it doesn’t matter how big their jets are.

6.  Failure to communicate value propositions in clear, concise and compelling fashion.

Next up is the debilitating disease called ‘failure to communicate’. For those old enough to remember the classic 1967 Paul Newman movie ‘Cool Hand Luke’, seared on the brain is a key line spoken by the prison warden to Newman who plays the maddeningly defiant inmate named Luke. “What we have here is a failure to communicate…”, upon which Newman is shot in the neck and on his way to exsanguinations (aka bleeding to death).

Many entrepreneurs work hard to discover a point of differentiation then blow it because they do not communicate their message in a clear, concise and compelling manner. I watch many entrepreneurs bleed to death through their failure to communicate.

Your Solution: It’s pretty simple. Learn how to communicate better. Again, I reference point #1 above. If an entrepreneur is truly engaged in conversation (read: dialogue, not monologue), then you’ll learn the language of your customer. If they speak Russian, then please stop trying to speak French to them. Listen to the words they use and then use them right back at them. Do so through focus on these 3 points:

  • Be clear (are your customers unclear about who you are and what value you bring to them?).
  • Be concise (are you somewhat clear but go on and on and on in your messaging?).
  • Be compelling (do the words you use persuade your customers to take the action you want them to?)

7.   Inability to nail a profitable business model with proven revenue streams.

In the end, this is the sum total. Fail to accurately achieve product/market fit where money gets made, and you’re sunk. Entrepreneurs can actually have each of the four above reasons solved, but still miss the business model boat. Twitter is a perfect example of this (although 2013 may be the year they finally turn black in the profit/loss column).

Your Solution: Startups need to move swiftly without spending tons of cash to figure out their secret sauce. Using tools and methodologies such as Minimum Viable Products, Lean Marketing and Experimentation is critical.

A perfect example of this comes from Tony Hsieh’s book Delivering Happiness, wherein he describes the early days of Zappos. He and his co-founders weren’t even sure back in the late 90’s that people would dare order shoes over the Internet. So they ran a quick test: Up goes a website with shoe images taken from manufacturers’ websites, some buy now buttons and watch to see what happens.

Cha-ching. Order comes through, one of the guys sprints to the local shoe store, buys the requested shoes at full retail, and then scurries home to ship them out. Did they lose money on every pair of shoes shipped? Yes they did. But did they quickly ascertain whether they had a potentially viable business idea? Yes again. All with zero inventory or fulfillment capabilities.

Think and move quickly, ‘fail fast’ if you’re going to fail at all, and nail your business model.

Otherwise, you’re in the 80% bracket.

Like I promised Businesses that have failed previously check them out and don’t and be “Awe” Cuz You might know them…

1. BLOCKBUSTER (1985 – 2010)

Home movie and video game rental services giant, Blockbuster Video, was founded in 1985 and arguably one of the most iconic brands in the video rental space.  At its peak in 2004, Blockbuster employed 84,300 people worldwide and had 9,094 stores. Unable to transition towards a digital model, Blockbuster filed for bankruptcy in 2010.

In 2000, Netflix approached Blockbuster with an offer to sell their company to Blockbuster for US$50 million. The Blockbuster CEO, was not interested in the offer because he thought it was a “very small niche business” and it was losing money at the time. As of July 2017, Netflix had 103.95 million subscribers worldwide and a revenue of US$8.8bn.

2. POLAROID (1937 – 2001)

Founded in 1937, Polaroid is best known for its Polaroid instant film and cameras. Despite its early success in capturing a market that had few competitors, Polaroid was unable to anticipate the impact that digital cameras would have on its film business. Falling into the ‘success trap’ by exploiting only their (historically successful) business activities, Polaroid neglected the need to explore new territory and enhance their long-term viability.

The original Polaroid Corporation was declared bankrupt in 2001 and its brand and assets were sold off. In May 2017, the brand and intellectual property of the Polaroid corporation was acquired by the largest shareholder of the Impossible Project, which had originally started out in 2008 by producing new instant films for Polaroid cameras Impossible Project was renamed Polaroid Originals in September 2017.

3.TOYS R US (1948 – 2017)

Toys “R” Us is a more recent story about the financial struggle one of the world’s largest toy store chains.  With the benefit of hindsight, Toys “R” Us may have led to its own undoing when it signed a 10-year contract to be the exclusive vendor of toys on Amazon in 2000. Amazon began to allow other toy vendors to sell on its site in spite of the deal, and Toys “R” Us sued Amazon to end the agreement in 2004. As a result, Toys “R” Us missed the opportunity to develop its own e-commerce presence early on. Far too late, Toys “R” Us announced in May 2017 its plan to revamp its website as part of a $100 million, three-year investment to jump-start its e-commerce business.

While filing for bankruptcy in September 2017 under pressure from its debt of US$1bn and fierce online retail competition, it has continued to keep its physical stores open.

4.  PAN AM (1927 – 1991)

Pan American World Airways (aka Pan Am), founded in 1927, was the largest international air carrier in the United States. The company was known as an industry innovator and was the first airline to offer computerised reservation systems and jumbo jets.

The downfall of Pan Am is attributed to was a combination of corporate mismanagement, government indifference to protecting its prime international carrier, and flawed regulatory policy. By over-investing in its existing business model and not investing in future, horizon 3, innovations, Pan Am filed for bankruptcy in 1991. Pan Am is survived only in pop culture through its iconic blue logo, which continues to be printed on purses and T-shirts and as the subject of a TV show on ABC starring Christina Ricci.

5. BORDERS (1971 – 2011)

Borders was an international book and music retailer, founded by two entrepreneurial brothers while at university. With locations all around the world but mounting debt, Border was unable to transition to the new business environment of digital and online books. Its missteps included holding too much debt, opening too many stores as well as jumping into the e-reader business to late.

Sadly, Borders closed all of its retail locations and sold off its customer loyalty list, comprising millions of names, to competitor Barnes & Noble for US$13.9 million. Borders’ locations have since been purchased and repurposed by other large retailers.


Less than 2 years into its operations, the ridesharing platform announced in September 2017, that it would be shutting down.  Citing lack of resources to run the business, the shareholders/Investors came to a conclusion to shut down operations.

Perhaps, the biggest reason GoMyWay could not monetise its platform is the fact that some of the users tried to circumvent it. This is same for most platforms; once the users on the 2 sides have contact, there is an incentive to always take transactions off the platform.  Both parties would just reach a private agreement on time and place of pick-up every day. The platform was thus reduced to a place for an introduction.

The classified ads platform also recently announced that it was shutting down its operations. Nils Hammar, Saltside Technologies founder and CEO, revealed that it was because the platform didn’t generate desired returns on investment (ROI); hence, the decision to scale back on its investments in Nigeria.  He also noted the high cost of data and internet use as a major hindrance to the business.

In addition to Hammer’s points, there is the age-long problem of the high cost of doing business in the country. The platform eventually bit the dust in October 2017, barely 16 months into its operations.


The platform came on board with the aim of making millionaires of up to 100,000 Nigerian carpenters and try it did. The showroom platform for carpenters to display their works and get connected to customers also shut down business. After 12 years of hustling, CEO, Sheriff Shittu, announced in 2016 that it was closing up shop.

The inability to scale on its operations dealt a big blow to this promising platform.

Easy taxi

Easy taxi was one of the first Rocket Internet hordes to launch in Africa in 2013.The platform which began operations in Brazil connects taxi drivers and passengers; it has over 1.5million app downloads and 45,000 taxi drivers on its platform. Despite an additional funding of over $10million from Rocket International for its expansion into Asia and Africa, the news of its exit from the African market came as a surprise to many.

The co-founder on the Nigerian side, Bankole Cardoso, stepped down in April 2016 and the business packed up. Reports had it that the startup was looking to focus on its Latin America market.


Konga made entry into the Nigerian market in 2012 and was one of the biggest e-commerce players in the country. 2 months after laying off over 60% of its workforce, the embattled e-commerce platform last week announced that it had been acquired by Zinox, a local tech firm which manufactures and distributes computers and manages data center infrastructure. This sees Zinox take over Konga’s assets including its online mall.

The cash-for-equity deal was reportedly higher than the $10 million price that has been widely reported. Zinox will buy out ownership stakes from Naspers and Kinnevik who are major investors in the e-commerce platform.


The startup, whose mission was to connect students and student entrepreneurs across Africa through e-commerce, was founded by David Edet in 2016. It had a promising start and made more than N4 million in sales revenue in just a month after launch.

According to David, the downfall of Camplus was imminent as “the recession prices and the high cost of running the business in Nigeria was such a hard blow.”


This classified ads platform also announced that it was shutting down its operations in Nigeria and other African countries last week, barely 3 years after entry into the Nigerian market. Naspers, former major shareholders of Konga which it divested to Zinox Technologies recently, said it has made a decision to consolidate its business operations in Nigeria.

According to Naspers CEO, Bob Van Dijk, Naspers plans to accelerate the “path to profitability” of its e-commerce businesses and sees a potential for initial public offerings of companies in its portfolio.

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