5 Surefire Ways to Cause Your Small Business Startup to Fail

Small business startup

No one starts a business with the intention of seeing it fail, but for 1 out of every 2 new business owners in the United States, that’s exactly what happens. Fortunately, there are some steps you can take to keep that from happening.

But in an attempt to show the importance of preparation when starting a new business, I’ve put together a list of five things that almost always cause a startup to fail.

1. Starting the Business for the Wrong Reasons

There are a lot of good reasons for starting a business, but not all them will lead to success. And even if they do, oftentimes the entrepreneur regrets the choice because he or she is tied to the business.

One of the worst reasons to start a business is to make a lot of money. It’s true that entrepreneurship is really the only way to build a fortune, but that can’t be the only reason you decide to launch. In addition, you need passion for the idea, and a desire to take the product or service to the public in order to fulfill a need.

Think about it, if making money is the only reason you start a business, what would happen to your drive and motivation when things get tough? Or when you have to choose between working on the business or doing the things you really love to do?

The truth is, a love for the product or service, or a passion to take it to the public is a much-needed component for a truly successful launch when starting a new business.

2. Not Having Enough Money

Too many fail when starting a business because they fail to do the math before launching. It’s easy to see your new business through rose-colored glasses and underestimate how much it will cost to operate it for the first year.

In addition to having to pay your business expenses, you’ll also need to continue to pay your personal expenses such as your mortgage, rent, groceries, utilities, car payments, and everything else.

3. Not Understanding the Market

Did you know that many new business owners think they have a great product or service, but fail to test it before launching? Unfortunately, most of the time, that leads to shattered dreams and a closed business.

It’s absolutely necessary to test the market before you launch to determine whether or not your potential buyers are excited enough about your product to buy it. If they’re not, your business is likely to fail, but if they are, you just may have a winning idea.

4. Not Having Enough Experience

One of the most mind-blowing things I’ve ever read is from a recent study that asked people what they thought was the best way to learn about entrepreneurship. The answer? Start a business.

Oh. My. Gosh.

In fact, no one should even think about starting a business until they have thoroughly researched and planned for it. That kind of thinking is likely the attitude behind the 50 percent of business owners who have to shutter their doors every year.

Experience and planning is key, period. For those who want to dive right in and start a business without it, you’re chances for success are dismal.

If you haven’t yet worked in the industry, take a job in it to get the experience you need. If that’s not an option, at least hire someone who has the experience you lack.

5.  Growth That's Not Properly Managed

Believe it or not, but growth can be the downfall for many new business owners. That’s because things look good—money is coming in and they can barely keep up with the orders or service calls.

That’s all fine, but unless that growth is properly managed, and the money that comes with it, it could take the business down.

One of the biggest mistakes when a new company is experiencing rapid growth is the mistaken belief that the profits can be spent. But here’s the truth: rapid growth results in more business expenses for things like additional employees, increased cost of goods, or expansion plans, and unless the cash flow is managed quickly, the business can run out of money, even in the good times.

Those are my top 5 reasons a lot of new businesses have to shutter their doors. Do you have any that you think are more important? If so, I’d love to hear your comments below!