4 Common Ways Why Small Businesses Fail,
and How Can You Counter Those Issues?

What is the reason behind the failure of small businesses?That’s the million-dollar question. Establishing a business isn’t an easy thing to do, and keeping it a float is another level of an ordeal.

Here, are some of the statistics that will tell you about the conditions that the startup companies face:

  • About 20% of the startups are able to stand firm against the losses incurred in the first year.
  • According to the data released by the US census, the establishment of the startup is at a 40-year lower rate.
  • The first five years are challenging for a business to gain stability

These statistics could come out to be scary to the new entrepreneurs who are all set to start on their venture. However, we would rather suggest that you treated these statistics and the failures of other companies as a lesson to mull over. 

As a matter of fact, their flaws can work out in your favor; after all, that is how the spirit of an entrepreneur should be. 


Read this article to find out about where the small businesses go wrong and thus run out of business in the first year itself. 


1. Lack of Robust Planning: 

It isn’t essential that what you think about the pen and paper of a good business idea should be ideal in the practical field. 

More often than not the small business owners often go through this phase in their business, which ultimately leads to failure. However, in no way, we would suggest that you did quit your passion. Instead, your idea would demand more research and fieldwork.

More importantly, you need to have proper planning about the execution of the idea that you have come up with. And you are good to go. 

A robust business planning will demand of your UVP (Unique Value Proposition). In simpler words, what is the unique proposition that would help you stand out from the rest of the crowd? 

Once you have figured that out, there would be no other way to stop you from reaching towards your goal. 

For the small businesses in Collaberos, we make sure planning happens by making it a ceremony. We encourage all teams to use Scrum methodology to make sure this happens. 

For some small businesses, the CEOs form a CEO group, and help one another do this on a regular basis 


2. Lagging Behind in Interpreting the Customer’s Behavior:

In an age when establishing a connection is no big deal, it would rather be contrary to say that it is getting more and more testing to institute an attachment. 

New businesses are quick in figuring out all the marketing strategies and setting up an image, but when it comes to an enclosure, they are unable to get at par with the old businesses and this becomes one of their weak points. 

Your customers expect you to deliver quality service. And if, in any case, you fail to do so, be ready to face all the sordid comments and complaints on your social media page. 

In today’s era, when technology is just so quick, the word-of-mouth marking amplifies your image faster than what meets the eye. Therefore, it is crucial for you to monitor, address, and solicit the feedback given by your customers. 


For Collaberos members, there is a multi-prong approach:

  • We maintain a shared customer contact team, who are always available if the customer has a problem. 
  • We have a shared (experienced) marketing manager whose first responsibility is to make sure such issues are addressed. 
  • The shared marketing manager also keeps suggesting regular revision marketing strategies based on external cues as well as based on his experience.

3. Mismanagement of the Inventory:

To establish a substantial business, you will have to manage your inventory well. If in any case, you failed to do so, be ready to face the full stop. 

Mismanagement of the stock is regarded as one of the primary reasons for businesses today to fail. Also, they can lead to shortages or overages and can serve the purpose of being killers of cash flow. 

Poor management of the inventory is more of rookie mistakes that usually the newly-found businesses make. However, you need to counteract in such a situation and spurn the circumstances in your favor. Only then will you be able to become one renowned business player. 

Collaberos consultants help institute the purchase and inventory processes of our member companies, like that of a large company. 

Tools are introduced early on, so there are no hiccups later. The inventory management tools used have intelligent reporting and leverage artificial intelligence to make sure that the inventory is optimized.


4.Growth is Unsustainable:

Slow and steady wins the race! This rule applies even to businesses. 

Get yourself out of the path of being greedy to the humble one. Take things slowly! Don’t sit on the edge of continually expanding your business, which would usually be done on credit financing. 

And before you can even confer as to what the matter is and how much revenue is being generated, you will be soon in the pool of heft debts to repay. 

The market can take a hit on you at any moment. Thus, you must be prepared to deal with the situation well. Instead of relying upon the quantity, try and focus on the quality that you serve your clients with. And watch your business surging. 

For Collaberos members, we help them plan in advance. Collaberos process manager regularly reviews the business processes to suggest timely improvement in processes and tools. 

We also maintain standby help in case there is surge in requirements, or in case any issues have come up. The mentor regularly reviews performance with the CEO, who makes decisions on when to scale up, and when to diversify.

Bottom Line:

Another hurtful end of the spectrum could be when the businesses fail to reach up to their sales goal. This often is the situation when you entirely depend on just one large customer. You are advised to diversify with your clientele base. 

To hit your sales target, you must prepare a solid strategy for your sales and make plans about alluring your customers.  And that’s where, Collaberos comes in with a permanent but shared infrastructure, mechanism and workforce that will manage such initiatives end to end for several small businesses. 

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July 16, 2020

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