Part of being an entrepreneur is being willing to take risks. It is no surprise that not all businesses “make it.” 

In fact, more than 50% of all new businesses fail within the first 3 years. Even more unfortunate, however, is the fact that the reasons for business failure are usually avoidable! 

Because of this – you need to understand the most common mistakes that aspiring business-owners face as they prepare to launch their business. 

The most common reasons small businesses fail are 

To succeed as a business owner, you MUST be aware of these seven common reasons for business failure so you can avoid them and lead your business to success!

#1: Inadequate Financial Management
Whether it’s not having enough money to start the business, mishandling finances, or not having savings put aside for emergencies, inadequate financial management is one of the most common reasons businesses fail. Starting a business means investing a significant amount of time, resources and energy– making informed financial decisions is crucial for the survival of any business.

#2: Unclear Business Plan
Not having a clear vision, trying to offer too many products or services, lack of research prior to launching the business, and inadequate marketing are all indicators of an unclear business plan. Knowing the “what” and the “how” is important to keeping a narrow focus so you can reach company goals. 

Even more importantly, however, is the “why” of the company. Without a strong foundation of a clear business plan, it is nearly impossible for a business to thrive. 

#3: Not Listening to the Customers
A business is successful when it knows what its customers want and what they are willing to pay for it. Ignoring the needs and wants of the target market or being unwilling to make changes based on customer feedback is a sure way to decrease profits.

#4: Treating Employees Unfairly
Oftentimes, business owners forget that the way they treat their staff has a much bigger impact on the culture and ultimately the bottom line of the business than they realize. Unfair employment practices, low wages, poor training, and lack of accountability systems in place are all contributing factors to business failure.

#5: Lack of Delegation
Business owners who tend to think that they need to do everything themselves and / or micromanage their staff, often end up with unnecessary added stress which can lead to business failure.The need to hand off certain decision-making, tasks, duties, and responsibilities to other people is an important lesson that business owners often learn the hard way or when it is already too late.

#6: Giving Up Too Early
Did you know that it can take 1-3 years for a business to just break even? 

It can take a long time to start seeing a business be profitable and it takes a lot of perseverance. And although there are some cases in which a business should close for legitimate reasons, it is far too common for business owners to prematurely close their business.

#7: Poor Decision-Making
Making bad decisions is the quickest way to kill a business. As people start their businesses, it can be tempting to make decisions that lead to instant results instead of thinking about the long-term trajectory of the business. Lack of accountability and mentorship, short-term thinking, and misalignment to the business plan all contribute to poor decision-making.