Why do small businesses fail?

June 16, 2013Post by Laura Humphreys

sorry we're closedAccording to a Dun & Bradstreet* study, ‘businesses with fewer than 20 employees have only a 37% chance of surviving four years (of business) and only a 9% chance of surviving 10 years.’ Restaurants have only a 20% chance of surviving two years. Of these failed businesses, 90% closed because the business was not successful, did not provide the level of income desired, or were too much work for their efforts. The failure rate for new businesses was 70% to 80% in the first year and only about half who survived the first year would remain in business the next five years.

I spend much of my life working with and listening to small business owners, and I am now certain the true reason so many businesses fail (cease to exist) before year four is because people go into business for the wrong reason.

When I make presentations to business groups and ask why they chose to start a business, the answers are always the same. I wonder if you identify with one or some of these reasons people give:

  • I thought I could run a business better than my boss.
  • I was tired of working for someone else.
  • I wanted to be in control of my destiny, choose my own hours, and go on holiday whenever I felt like it.
  • I am good at something or trained in a particular field and have built my business around my skill set.
  • I had a good idea and believed I could make a business out of it.
  • I don’t know; it just sort of happened.
  • I want to help people, I’m not in it for the money (this response is particularly true of health practitioners).

Do any of these answers resonate with you? Have you really given much thought to why you are in business or what you really want out of it? Or have you stumbled into business as a reaction to your own personal circumstances without a true sense of purpose driving you?

It’s important to ask yourself; because your reasons for being in business will determine the way you approach it, which, in turn, will influence the ultimate success you have.

There are only two reasons to go into business for yourself:  to make money and to make a difference.  My book Liber8 Your Business shows you how you can do both and build the business you really dreamed of.  I’m looking forward to sharing it with you soon.  In the meantime if you have any questions about your business  model feel free to email me laura@liber8yourbusiness.com


*Dun & Bradstreet is a public company headquartered in Short Hills, New Jersey, USA that licenses information on businesses and corporations for use in credit decisions, business-to-business marketing and supply chain management. D & B maintains information on more than 205 million companies worldwide.

If you want to put your business under the spotlight – Laura’s next Acceler8me Programme, inspiration and support for passionate business owners, kicks off in August.  Click here for details