Top Six Reasons Why Most Businesses Fail

The rate of failure at small businesses is alarmingly high and very unfortunate, but it is a fact of life. Small businesses owner across the world enter the market with their best intentions only to find out just a few years later their business won’t be able to sustain. There are countless reasons why most small businesses do not survive, but they are often spurred by two factors: the business owner or the market.
Rather than being discouraged from starting your own home business, learn from the mistakes others have made time and time again. Here are some of the more common reasons why most home businesses fail.


Most home business owners come from an employee mindset so once starting their own business they use traditional business practices which they’re already accustomed to.

Such business practices include:

  • 9 to 5 work day
  • 40 hour work week
  • Leadership hierarchy

Unfortunately, it seems that most home business owners don’t realize that these traditional business practices can work well for many companies but often not for their own. Quickly do business owners realize the system they have participated in for years can’t be applied to their own business.

To combat failure when transitioning from employee to business owner, assess which business model works best for your own business. It could be fewer hours, virtual employees, fewer products or odd operational days. Take the time to adjust to what works for your business, and you’ll avoid this costly failure of following traditional business models.


The single largest reason why small businesses fail to succeed is the unwillingness to evolve. If you don’t believe this statement, look at every small business that has formed over the years only to fail only after a few short years in the marketplace.

Most often, these businesses come to the marketplace without new tactics, innovative products and a lack of understanding of what needs to be done to keep ahead of the competition.

Many business owners just want a proven system that’s worked before often replicating their old job. The problem with this approach to business by going with “what works” is that the market is already evolving by the time you get into business. Once you’re in the marketplace, research and development are way beyond where you’ve started.

With this being said, always invest toward evolving your home business. Don’t be afraid to try out new marketing methods, products, and service. Be ready to cut back on employees, customers and your items – grow in time through a constant rate of change; don’t be left to die a slow, agonizing death due to the unwillingness to change.


Many businesses enter a market and immediately drop the prices of all their products and services across the board. Not only does this hurt the marketplace in the whole but there will always be new businesses which will play the price war with your business.

Getting locked in ever decreasing prices is one of the fastest ways for businesses to fail. As profits fall from cutting prices, the bottom line won’t be enough to sustain a business and eventually it will close shop.

Instead of trying to keep an edge in pricing, find your business’ unique selling point. The USP can be the customer service, quality of the product or the unique service only your business offers.


Even after sales come rolling in, a home business which does not have a “culture” will not survive.

The culture of the business comes down to every aspect and reasoning behind the business decision, customer interaction and influence on the market. A business that doesn’t build culture may continue to generate a profit, but the pillars of the business will slowly crumble as the cultural foundation distilled by employee’s withers away.

For a perfect example, consider Zappos. Zappos commands impressive profits each year because they have built a culture around their brand. Every decision the company makes has to reflect what the culture details. If a business decision doesn’t fit, it isn’t done.


Every business has the best intentions to provide a great product or service, but the plain and simple fact is that if the marketplace doesn’t demand them, they won’t’ buy them.

A business will fail miserably from the start if they don’t do their research into what customers are actually buying.

The best way to enter a market is first to find a need that isn’t being fulfilled. Base your business around what customers demand instead of what you assume. You can easily avoid failure when you know the marketplace is hungry to buy instead of trying to convince them.


The web, brick and mortar, direct mail, joint ventures, business to business; there are countless ways that businesses can strive, but only one of them will truly work great for yours.

Many businesses that fail enter the market using the same old methods time and time again. Brick and mortar sales can still be very profitable, but the expenses required to rent offices, handle employees and other business expenses will quickly catch up.

Perhaps instead of the traditional store, opt toward a website. The unlimited reach of being online, combined with cheap marketing platforms, is a great place to start for many home businesses. Without the expensive overhead, businesses can strive where many others have failed time and time again.


It’s unfortunate that most businesses will fail within the first five years. Even with the best intentions to be a great business, there are far too many factors to skip over when planning and launching a home-based business idly.

Using the fore-warnings above, learn from the mistakes that others have already made. Be ready to evolve, throw away traditions, try out new platforms and build a great brand. It’s only through passion, dedication and the right research that a business will avoid failure – good luck!