A large number of small businesses fail shortly after their inception. The reasons for this failure are often attributed to the owners’ lack of experience and their lack of management and marketing skills. Economic advisors, however, point to other, simpler reasons that unexpectedly impact any project’s chances of success. What are the reasons for the failure of small and micro-enterprises?
1- Blind imitation
One of the most common mistakes is when someone sees that someone else has succeeded in a project and assumes they will too. All they need to do is raise or seek capital and immediately begin practical and implementation steps. Most small projects that rely on imitation and emulation are often doomed to failure.
2- Lack of vital information
The lack or absence of vital information necessary to translate an idea and ambition into a successful project capable of sustaining and growing. This is in addition to marketing information about the target consumer and competitors needed to build a successful marketing plan. Small business owners are often unaware of the importance of these details and may ignore them, launching their projects based on intuition, guesswork, and improvisation. Their success becomes a matter of chance.
3 – Excess capital
It’s self-evident that a small amount of capital gives a project limited room to operate, potentially reducing its chances of success. However, what most people don’t know is that excess capital often has negative effects. How so? When capital is large, small business owners tend to spend it left and right, focusing on marginal issues and superficialities (such as luxurious offices), and neglecting the essentials and primary goal: the project’s success.
4- Insufficient liquidity to continue
Money is the lifeblood of any business or project, no matter how small. One of the reasons that kills a project in its infancy is entering into it with less capital than necessary, which prevents the owner from facing circumstances or seasonality.
5- Not separating project resources from personal resources.
A successful project requires sound financial management. Business owners and small businesses often confuse their personal resources with those of their project, failing to separate their personal expenses from those of their project. Thus, poor financial and accounting management is also a major cause of small business failure.
6- Resorting to relatives and acquaintances
The way you select your team will determine whether your project succeeds or fails. Hiring friends and relatives without considering their skills and experience in the project’s field is a major reason for the failure of small and medium-sized enterprises.
7- Neglecting the marketing feasibility study
The marketing aspect of any project is crucial to its success. Marketing is both a science and an art, and its importance has recently begun to emerge in our market. Marketing, in short, is based on studying the desires and needs of the market segment we wish to serve, examining marketing opportunities in advance, and then fulfilling these needs. Neglecting the marketing aspect has become another reason for the failure of small businesses.
Read also : How to conduct a marketing feasibility study for your project .
8- Lack of clear vision
The lack of a future strategy for business growth and development, and for advancing the small business through research and evaluation of opportunities and alternatives, is one of the most prominent factors that in turn leads to the failure and survival of a small business.
9- Arrogance of the first success
Many small businesses have succeeded, but their owners assumed the situation would continue. This has led to stagnation, inaction, neglect, and sometimes arrogance. We live in an era where the market and consumer tastes are changing rapidly. A strong competitor may emerge offering better services and prices, and the result in this case is clear.
Read also : 7 ways to start your own business alongside your job
10- Excessive optimism
When signs of failure appear, some projects’ owners insist on continuing and persevering. Often, the reason for the project’s continuation is optimism about a future opportunity or an improvement in the situation, without this optimism being tied to well-studied facts and data or to urgent market conditions that will change rapidly based on confirmed information. This leads to the continued depletion of financial resources and may end up with the accumulation of financial debts that require several years to repay.
These were the common reasons for small business failure. Knowing them will help you avoid making common mistakes that may seem simple on the surface. Therefore, you must pay attention to every detail of your business and project, whether small or large. Let continuous learning, persistence, and perseverance be your weapons to overcome all obstacles and surmount all challenges, no matter how difficult.
