Reasons Your Small Business Fails

The only true way to success is through failure. Time and time again we see failure, but we fail to push through it. It's starting this blog or another blog only to see nothing come from it. It's making a few dollars after working 40+ hours 2 months straight to help a friends business out, only to run yourself in the ground. It's starting a business and not finding the right target market for your product. It's life.

I can go on and on with examples of how we all fail. In fact, those of us who are most successful in life have failed more times than they can count. And there is a reason for that. They've learned to persevere, to push through the failure and overcome the setback. Those of us who don't find success often give up after failure. 

With every small business comes trouble, and those troubles are often related. Can you fix them? Of course, but it's going to take a lot of strength not to give in too easily. 

Why Business Fails

1. Lack of Vision: As with any organization, nonprofit or for profit, you need a vision. The first thing I see when I come across a struggling business is the lack of vision. 

Take for instance a former pizza place in Clinton, Indiana. Their business model was fail proof. In fact, most pizza business are. It's cheap to make a pizza. But that's not the point of this. 

The business was in town for a long time. In fact, my mother worked at one of these places during High School. About the time I was 18, the business closed down for many personal reasons. Rumor has it a big divorce cause a lot of financial hardships running the business into the ground. 

About 6 years later, the father of the same family that owned the previous iteration of the business buys back into the franchise and opens it up in downtown Clinton. While the facility was small, the amount of traffic and location was ideal. It was a mere 100-200 feet from where the Clinton Little Italy Festival takes place, it was located near all of the offices in town, and it was right off the highway. It was a fail proof spot. Yet it failed. 

Why you might ask? The lack of vision. The owners saw this as a way to make easy money and do little work. So they set up their business hours to be exactly 40 hours a week and closed on Sunday (the biggest day for pizza sales in the fall). They also closed during most holidays causing them to miss out on big sales days. This doesn't even mention the fact that they closed 2 days during the busiest weekend in town. This, on top of several other key reasons caused them to go out of business. Not because their business model was bad, but because their vision was to benefit themselves and not the consumer.

2. Paying Yourself First: This is the hardest part of why all businesses fail. Look, you put in the work. You bust your tail, and in the end you have to decide if you want to have a paycheck to pay your bills or if you want to replenish your organization with funds to grow. 

My biggest recommendation is to balance that. In the beginning replenish your organization so that you can take extra funds to pay for management and staff that can carry most of the workload for you. Once you've done that you can start taking extra profit to pay yourself, just don't over do it. 

When one of the local business owners told me they were struggling to make ends meet for the business, the first thing I asked them was "how much do you pay yourself?" By the way, if you haven't asked yourself that question already, then you're already losing your vision of owning and operating a small business. 

The owner went on to tell me they were paying themselves about $1,500-2,000 month when they were only turning a Net Revenue of $18,000-20,000. By the time they deducted their salaries and the operational expenses, they were barely breaking even. This came back to bite them hard when business slowed down. They started turning a Net Revenue of $13,000-14,000 and began losing money. Yet they kept paying themselves. 

Instead of spending extra on the business to help it grow and refine it's product, they put all of the money into their own pockets and drove their business in the ground. Even while they were still turning a small profit, they decided to sell the franchise. This is when they went bottom up. They asked for too much, lied to potential clients, and did back door deals with friends. Only to eventually put them out of business. 

They only wanted out because it wasn't supplementing their income enough. Not because the business was a failure or because there was no longer a demand, but because they were getting rich quick. 

3. Quitting too Soon: A lot of small businesses and nonprofits give up too quickly. They expect greatness overnight. In fact, I myself often struggle with this exact issue. Over the past 2 years I've launched countless blogs/websites, research into business ideas, and even drug my friends along to learn and assist. Yet every time I get started the going gets tough and I quit. Simply because I'm afraid to fail as are many people today. 

With the struggling economy, the promise of unlimited income potential, and the dream of being our own boss almost every one of us have tried some "get rich quick idea" or business that promises us this exact idea. Once we struggle out of the gates, we quit. We walk away and call it a scam or a failure. Instead of persevering we give in to our fears, and we go back to our normal routine. 

How we Overcome This 

There is no one magic answer to this question. We all must find our own way to be successful and overcome our fears. If anything, you must remember to follow your vision. In fact, I suggest taking and making a poster with the vision next to your desk so that you see it everyday. Put your vision on your phone's background. If your vision is to be very successful and rich, own multiple cars and houses, then use that as motivation. 

If you're in business to serve people, put people first. Show up with a smile on your face. Become friends with your consumers and remind them that you're there for them. When you lose the vision, you lose the business, and you quit. Don't give up. 

Stop paying yourself first. Grow your business, make it successful, and make it profitable. Once you've got a steady revenue each month, you can pay yourself more. Add in bonus incentives to your salary so that you have to work for it. Create a board of management, allowing every manager under you to set your goals and expectations. This is a system of checks and balances, and it produces employees who collaborate and work for a common goal. Don't be the Dictator, be a leader. 

Lastly, don't quit. Just don't. If you give up as soon as it gets tough, you'll never overcome that. Keep pushing through. Life is full of roller coasters, so let it ride out. Eventually you'll come back to ground and even out. But most importantly, enjoy the ride. Life is short. We all don't get the opportunity to live out our dream. But at least we can all try. 

Colby Martin is a Business Consultant and blog writer. For consulting opportunities and services, visit: CAM Consulting. This blog is paid for through affiliates and donations. If you'd like to support Colby, contact him at cmartin2829@ymail.com or click the DONATE button on the side of the page.