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Why small businesses fail

If you’re thinking about starting a small business but an element of fear or uncertainty is holding you back, this article will help add clarity. There are many reasons why businesses fall short, so it’s important to have an understanding of some of the common errors so that your business doesn’t miss the mark as well.

Insufficient working capital

One of the main reasons that businesses fail to hit the ground running is simply down to poor management of working capital. Business owners should be aware of how much capital is needed to cover the day-to-day operations of the business. Without tight control and understand of these costs, your small business could quite quickly run out of working capital, forcing you to shut up shop.

If you are looking for support around managing your finances and working capital, visit here.


It can be very easy to get carried away when business is booming. The problem is that many business owners can end up over-expanding, put unnecessary pressure on the business. The second businesses start over producing and supply outweighs demand, they’re in trouble.

There are indications on when a business should begin expansion. This could include situations where a business is unable to fulfil customer demand. If you are thinking about expansion, you should carry out research to ensure that is the right move for the business going forward.

Poor planning

If you want to hit the ground running, you need a plan. Without a plan, you have no real sense of direction and this can be a major threat to the business.

What are the benefits of having a plan?

The first benefit, is the ability to map out priorities. With a plan in place, you know your end goal so you can start to map out the different actions that it will take to get you there. This will prevent you from wasting time and resources on activities that won’t benefit the business, which is often why many businesses struggle in their opening years.

Creating a plan will also get you to focus on your USP (Unique Selling Point). This is critical if you want to stand out from competitors and ultimately, this is the unique factor that will attract new customers.

Trying to cover every aspect of the business

When a business first opens its doors, capital is quite hard to come by, so to keep costs low, small business owners will often take on all aspects of the business. In reality, we all have our strengths and weaknesses so sometimes it makes sense to outsource certain tasks.

At the SME Centre of Excellence, we have a full range of wrap around support to cover all your back office needs so that you can focus on doing the things you’re best at.

Find out more about our support here.

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