Six prime reasons why your small enterprise is bound to fail

What could be the real reason behind the failure of SMEs in their early stages of growth? Here, we investigate.

It is not guaranteed that you’ll attract success once you establish a small enterprise. In fact, it is estimated that at least eight out of ten small enterprises fail before they even make the first steps of growth. This translates to a whopping 80 per cent of small business enterprises that are established and ran within 18 months.

A wise investor should aim at unearthing some of the things that can amount to the failure of small enterprises at their early stages.

So, what could be the real reason behind the failure of SMEs in their early stages of growth? Most people perceive that only lack of finances can lead to failure. On the contrary, there are other issues that can lead to failure and this is what you must aim at understanding before you even establish your small business.

Lack of proper tapping of finances

Well, it is rather obvious that finance is the pillar to the growth of small businesses. The main challenge that most SMEs face is unearthing the resources that can lead to better financing of businesses. According to FUNDERA INC research, only 23 per cent of loan requests from small businesses were approved by big banks in March 2016. This is considered as small percentage considering the willingness that big banks have in supplying finances to small businesses.

Chances are that most small business runners do not have a clue on how to link up with banks and get loans. Also, the business runners may not be interested in borrowing finances on grounds of refraining debts. Either case is a major contributor to the failure of businesses at early stages.

Lack of team building activities

It’s great when a workplace is filled with a positive vibe. This is why there needs to be frequent team building activities for work. This builds strong bonds, enhances professional relationships, and helps in keeping workers focused among other benefits. When everyone is supercharged and energised, they look forward to going to work and this will reflect positively on their output.

Team building activities are very important for any business to adopt. They are not hard to implement and may not need to be very expensive. However, they leave lasting impacts that can take a business or organisation to another level. In fact, business goals will be achieved promptly and as a result, an increase in ROI and improved customer satisfaction.

Lack of actual touch with customers

It is one thing to spot an opportunity in the market and take action, and it is another thing to engage with prospective customers in terms of dialogue. According to Forbes, most small business owners never take ample time to engage in dialogue with their clients. In this case, it is not just a matter of mere speaking but deep dialogue.

The customer is always seen as the prime determinant on how well a small business will progress. Lack of deep dialogue and engagements, therefore, will lead to warranted failure. The Cluetrain Manifesto, a small enterprise business book, outlines the importance of holding deep dialogues with your customers. The primary aim is to convert your prospects into long-term clients.

No actual differentiation

The question that is always asked is: how different are your products as compared to those of your competitors? Differentiation is something that most entrepreneurs tend to overlook and this can amount to serious implications. Note that differentiation also covers activities for work in any small business.

When everything matches what your competitor has to offer, the aftermath is massive competition and lack of sales. However, when you present everything differently, chances are that you will tap the attention of your prospects. However, differentiation must not be equated to substandard products. Rather, differentiation should be equal to uniqueness and better quality. Only then can a small business garner more sales.

Failure to communicate progressive developments

Now that you have eventually discovered the differentiation strategies, there is something additional that must also come forth- communication. Failure to communicate your differentiation strengths to your prospects and existing clients is a recipe for failure of any small business enterprise.

The solution to this is rather simple and implementable. First, you must make sure that you communicate any new developments to your prospects and clients. Secondly, you must make sure that your communication is concise and in a compelling fashion.

Ask yourself if the manner in which you communicate the developments is enough to compel clients to make even more purchases from your business.

Failure to link up with modernity

We are now living in a world of total changes. This has been made possible by the modern technology. Failure to endorse modernity is one of the reasons why your small business may be headed for doom. It is unfortunate that quite a large number of small business entrepreneurs fail to acknowledge developments in the line of technology.

According to SmartCompany research, companies around the world will be operating on the basis of technology by 2025. As such, small businesses today should also find a way to embrace technology and modernity in general. Automation has already made way into the business world, and this communicates how serious it is as far as modernity in small enterprises is concerned.


Your small business enterprise cannot fail if the right strategies are employed. Flexibility is, in a nutshell, the main factor that matters in driving any small business ahead. Any small business runner must be ready to embrace changes in the world and welcome anything that has the potential to multiply the current yields.

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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