7 Statistics That Explain Why Your Business Could Fail

THIS COLUMN MIGHT not start with the most positive of headlines, but let’s not be rose colored about business success. Many businesses do fail — and the last 12 months have certainly provided us with more challenges than usual in this area. Understanding the reasons for failure can help with the process of prevention, so let’s dive into the top reasons businesses don’t continue for an extended period of time (because businesses often fail from multiple issues, you will find these stats add up to more than 100 percent).

• 82 percent fail due to cash flow issues. A lack of cash has long been the biggest cause of business failure. Many feel sales are the main issue, but cash flow, which can also result from growing too quickly, is by far the biggest issue for businesses.
• 27 percent aren’t able to get the funding they need. This goes hand in hand with cash flow, as a failure to get funds to tide you over until things are better will also cause major issues.
• 42 percent fail to bring anything new to the market. Are you a business offering the same thing your competitors do? Sadly, many business owners are guilty of imagining a point of difference when none ultimately exists. Almost 50 percent of failures are attributable to the fact that a business offers nothing new and that no one would miss them if they went. Sobering, but true.
• 19 percent fail because of their competition. Are you looking at your opposition? Are you studying what they are doing so you can do it better? Or are you letting them take the lion’s share of your trade without a fight?
• 23 percent don’t have the right team running the business. The best businesses with the best opportunities in the best markets will fail if they aren’t run properly and don’t have the sales team to back it up.
• 17 percent lack a good business model. Having a clear plan increases your chances of success and goes hand in hand with getting the funding you need. Few will lend to a business that doesn’t know where it is going.
• 14 percent fail to market themselves effectively. You can have the best idea in the perfect market delivering the greatest results, but if customers don’t know about it, you may as well not bother. As a colleague once said, “Failing to market is like winking in the dark.”

Which of these issues present a threat to your business? If you feel yourself struggling, which issue is relevant to you right now? Prevention is always better than cure, so take the time to identify your potential stumbling blocks before it’s too late.

(Thanks to Business Insider and Fundera for the above data.)