Why do some small businesses fail?

Why do some small businesses fail whilst others succeed? We've highlighted some key reasons in this handy blog.

Written by Andrew Thomas
Digital marketing |   2 minute read

The UK is packed with innovative young businesses, full of fresh ideas. It has recently been reported that 46% of these are expecting to grow in 2015. This is of course, great news for the UK economy and an exciting time for those businesses expecting growth. But what about the businesses that don't see the same growth? Why do small businesses fail? 

The reasons for failure can be varied and diverse, but we've highlighted some key reasons below:


Over expansion

So you've set up, got your feet off the ground and business is booming. You've built a loyal customer base and this is growing, fast.

Whilst growth is the aim of almost every business, over-expansion can quickly take you off course as you scrabble for resources and over work your small team.

And we don't mean over expansion in the literal sense. An online business can now have a worldwide reach and a voice in every continent with only one employee. We're talking about the services or goods you decide to produce.

Once your order book is full and you are working at 100% capacity, accepting more work with the same level of resource is going to:

  • Over-stretch your workforce, frustrating them and reducing morale.
  • Force you to under-deliver on quality.

This will alienate those investing in your fledgling business and quickly deter them from sticking with you beyond their first purchase or interaction.

Take your time and only offer what you can reliably produce on demand with the team you have. 


No Plan B

You've set up the business you've dreamt of for years and it's successful - why would you ever want to change it?

A successful, engaging offering can quickly become unpopular or out-dated and knowing when a change of tact is needed can mark the difference between success and failure. Many small business have bags of self belief which can act as shackles on flexibility.

Although it is important to retain your vision, being able to adapt to what your audience really want or need can not only save your company - it can revolutionise it's growth.

No strategy for growth

Once you have the customer base, how do you capitalise on this? It's vital to promote return custom but you can't just expect people to keep turning up. 

We suggest:

  • Market segmentation

Taking the time to split up your market into specific groups, areas or personalities (as with the Inbound Methodology) will direct your marketing efforts and increase your conversion rate dramatically.

  • Increasing sales channels

Adding online capabilities to a traditional bricks and mortar business is the obvious example here, but what about developing mobile? Social Media sites such as Pintrest have begun to allow direct in-site purchases so these additional sales channels need to be considered for growth beyond the traditional e-commerce site.

  • Diversifying

Regularly updating your offer is a great growth strategy and one of the most straightforward.

Introducing a new dish to your restaurant menu or bringing in new ranges to your clothing website will make sure those repeat customers have exactly that - a reason to return.

Lack of competitor awareness

Small businesses are by their very nature, small. Whilst your team will be focused on building the internal structure, it's important to look outward.

Having good competitor awareness (or a lack thereof) can quickly leave you in last place, whilst your competitors change direction, change the conversation and take the market with them.

Competitor awareness not only allows you to notice what you're up against, it should direct your early investments. Knowing the successes, failures of your market and the gaps within it can be an invaluable tool for growth

To increase your competitor awareness and boost your small business growth, download our free competitor comparison tool today! 

The Digital 22 Competitor Comparison Tool

We're always keen to hear your thoughts on small business growth so leave your comments below: