why do some business plan fail explain

8 Reasons Business Plans Fail That No One Wants to Talk About

Danielle Hendricks

7 min. read

Updated October 27, 2023

As a full-time editor and academic mentor at an academic writing service, I have read hundreds of business plans over the years. To help students and startups, I have compiled a list of reasons business plans are rejected or given a low grade.

Of course, there are obvious reasons that business plans fail. For example, missing crucial deadlines for finishing the business plan, or drawing hockey stick profit projections can repel potential investors.

However, there are also less nuanced and more subtle reasons that investors and banks lose interest. These tips can help you avoid the minute and often overlooked mistakes that people make when writing a business plan. When investors and banks see hundreds of business plans every month, a small mistake can lead to a business plan being thrown in the rejection pile.

• The top 8 reasons business plans fail

1. Bad business ideas

Nobody likes to talk about it, but the main reason why business plans fail is bad ideas. Most ideas look great on paper—but all too often, companies realize they have invested in a bad idea once it is too late.

To avoid this, smart businesses are using “user-driven development” (UDD) to build new businesses. Lots of ideas seem great until you figure out that the market doesn’t actually want your product. In order to ensure that a business idea is sound, entrepreneurs should search for product validation by reaching out to their target consumers before sinking huge amounts of time and money into the project.

At Stanford University’s d-school , the designers use UDD to develop products that are user-centered. Firms that want to innovate with a focus on customers often hold small meetings with the potential end users where they describe the project and then ask users for their opinions.

After the first round of discussion, the firm can go back to the drawing board to incorporate the helpful feedback. Second and even third rounds can enhance the final product’s popularity. For example, The Embrace Warmer was created by asking mothers with premature babies what they disliked about traditional infant incubators in hospital maternity wards.

The mothers responded that not being able to hold their baby was the worst part of the experience. By focusing on the needs of the end-user, the developers of The Embrace—who were also students at Stanford—were able to create a highly demanded and successful business plan. Avoid wasting time on a bad business plan by gauging the market sentiment toward your project before investing a significant amount of time and effort.

2. Employee compensation is not incentive compatible

Business plans can fail because employees are not compensated in a way that aligns the goal of the employee with the goals of the company. In game theory, a contract is an incentive compatible if “every participant can achieve the best outcome to him/herself just by acting according to his/her true preferences” (Nisan and Roughgarden, 2007). For example, if an employee is paid with annual or monthly bonuses then the employee will only do what is good for the company in the short run.

In 2015, Forbes released a nice article on different salary packages for different company goals. One option is to offer tailored benefits to the employee. Startups and small businesses can offer more customized salary packages than large multinational corporations.

For example, instead of offering a standard salary package of retirement plans, child-care assistance, savings program, determine what the employee wants the most. For example, elderly employees may not be motivated by child-care assistance, so don’t focus on that in their package. Secondly, instead of offering an upfront payment of 2 percent of the company’s stock, offer a salary that pays that 2 percent over several years to ensure that the employee stays committed in the long-run.

3. No exit strategy for firing lazy co-founders

Anyone who has started a company knows that team conflicts are inevitable. A good business plan should have a step-by-step procedure for handling internal disputes. First of all, each co-founder should have a specific set of responsibilities with deadlines and consequences for failing to meet those deadlines.

Choosing the right co-founder is as important as choosing the right spouse. During the first few years, you may end up spending more time with the co-founder than anyone else. First, you have to know what are your own strengths and weaknesses. Try to find a partner that diversifies your skill set. Also, ask for references. Try to find out who they worked for previously, how they got along with their coworkers, and why they left.

Another way to help alleviate this problem is by delineating roles and delegating tasks. However, if a team member just does not have the time or the competence to achieve the goals specific to their role, then the company should have a polite but quick method for ending the relationship. Mentioning how these types of situations will be handled in the business plan is important because hurt feelings and vindictive ex-owners can damage the firm’s reputation and profitability.

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4. The team is not balanced

Another problem that I often notice on business plans is that the team is not balanced.

Company culture is an often underestimated challenge. I have read several business plans that present a compelling argument for a new product; however, the majority of plans fail to put together a team that has the competencies required to actually execute the business plan.

For example, I recently read a tech business plan that was making a health application for smartphones. However, the team did not have a single developer or IT specialist involved. If the business idea requires 80 percent of the labor hours to be performed by a software programmer, then the team needs at least one developer onboard. It is important to keep in mind that venture capitalists sometimes refuse to fund companies that only have one founder or have unbalanced teams.

5. Detailed financial projections are missing

The majority of business plans that I have been asked to edit have conveniently left out the balance sheet, cash flow statement, profit and loss statement, and income statement . The “numbers” are actually the most interesting part of the entire document for most investors. Break-even and return-on-investment (ROI) calculations are also parts of a good business plan.

My favorite tool for ensuring that I have decent estimations and great charts are the business calculators here on Bplans . Make sure to consider how legal costs and taxes will deduct from the bottom line.

Do not forget to factor in future expenses. For example, if the company needs to purchase new office equipment every three years, then the discounted value of those expenses should be included in the forecasted financial projections. Of course, the figures are only estimates, but they are important benchmarks that can be used to measure the company’s progress toward achieving their goals.

6. Spelling and grammar mistakes

Every time that I read a new business plan, my first step is to read each sentence out loud. In order to stop my mind from automatically filling in the correct spelling and grammar, I start by reading the last sentence on the page and working my way backward to the first sentence on the page. If you want to be 100 percent certain that there are no spelling errors, then consider hiring a professional editor to review your business plan.

Although some people think hiring a professional editor is “over the top,” the reality is that the most competitive firms have a professional editor review all of their documents for accuracy. If a bank or investor reads a business plan with typos, they will start to wonder if the entrepreneur is competent enough to run a successful business.

7. False assumptions

One of the final mistakes that students and startups make is falsely assuming the values of their investors and the values of their end-users, with some of the most common false assumptions being about their political or religious affiliation. This can be game over for successful companies, so startups should be especially careful.

Several examples exist of people that falsely assumed that their opinions were not controversial or were held by the majority. For example, Matt Harrigan, CEO of the startup Packetsled, stepped down after his comments about President Trump .

One piece of advice that my dad gave me can be helpful for writing business plans: “Opinions are like armpits. Everybody’s got them, and they all stink.”

The main point is that entrepreneurs and students who are writing a business plan should do their own research about the background of their potential investors and lenders. This ensures that you will have as much information as possible before pitching or handing over a business plan.

8. Failure to improve business plan after receiving feedback

Once you have finished writing your business plan, it is a good idea to send it out to at least three people before showing it to potential investors.

Think of these three people as your board of advisors. Ask them to read the plan and look for logical gaps in the content. If one advisor recommends a change that you disagree with, do not ignore his advice. Instead, ask the other advisors for their opinions and then make a decision. Edit your plan according to their constructive criticism, and thank them for their help.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Danielle Hendricks is an academic mentor at ACAD WRITE . In her free time, she is known for writing outgoing and funky pieces about the startup scene in Santa Fe, New Mexico.

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Why do business plans fail?

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Bad product ideas

Poor partnerships , a lack of detail , unrealistic financial planning , how a simple app can help improve your business plan.

Unfortunately, not every business will be a success. The failure of businesses is usually due to some issue in their business plan, and there are hundreds of different issues a business plan could have.

This article will describe some of the most common reasons a business plan might fail and how you can avoid them. We’ll look at common pitfalls such as:

• Poor partnerships
• A lack of detail
• Unrealistic financial planning

Sometimes, a business plan fails simply because it focuses on bad product ideas. A bad product idea means that the product or service your business specialises in does not sell well, and the lack of sales leads to an income problem for your business.

Business plans containing bad product ideas usually come about due to a misunderstanding of the term ‘ unique selling point ’. A unique selling point is what makes your product stand out from the products of the competition. It’s a feature that makes the product better as well as being unique. 

Many bad product ideas come from individuals that focus too much on the ‘unique’ part of the term unique selling point. While it is important to have a different product from anything else on the market, make sure you also know what your customers want from a product .

While it’s nice to have help running your business, it’s important to find the right person for the job before you write a contract for a business partnership . If you create a business plan as a partnership and your partner fails to fulfil their responsibilities, your business will struggle to succeed.

There are three things you may want to consider if you’re trying to avoid poor partnerships. The first is your partner’s skill set: look for someone with talents related to your business idea as well as talents you don’t possess. It’s helpful to have a diverse collection of skills within your business. 

Secondly, make sure your potential partner is as passionate about the business as you are. If they aren’t, you may find that you end up doing most of the work or that they leave the business as soon as things become difficult. While measuring passion and emotional investment is challenging, finding a business partner that matches your feelings regarding your business plan is vital.

Finally, create an exit strategy. While you may have found a perfect business partner, you never know what difficulties you’ll encounter in the future. So make sure you know what to do if there is an internal conflict in your company that you can’t resolve peacefully.

When you write a business plan , you need to make sure that you plan for almost anything. One of the biggest reasons business plans fail is because they don’t account for certain situations.

It’s impossible to plan for truly unexpected problems, but a detailed business plan will account for most situations by listing off your company’s weaknesses during a SWOT analysis . SWOT stands for strengths, weaknesses, opportunities, and threats, and it’s a standard part of most business plans. 

By using SWOT to list weaknesses in your business plan and potential threats to your success, you can start planning ways to deal with problems. For instance, you might identify a lack of sales as a potential threat. To account for this, you could invest in marketing or reduce your prices. If your business plan doesn’t account for these sorts of situations, it increases its chances of failure. 

Another reason for lack of detail in a business plan is low-quality research or not performing research at all. Without researching the market and industry you operate in, you’ll struggle to learn about your competitors or understand your customers’ needs. Thorough research is an essential part of avoiding business plan failure.

Financial planning is essential in business. You might not know the future of your business, but with a decent financial plan, you’ll be able to avoid most obstacles to success. If your financial plan is poorly thought-out or unrealistic, though, it might not be as valuable.

Financial plans are all about mapping out your company’s growth. If you’re too optimistic about this growth, it can cause serious problems. Unrealistic expectations can cause unprepared businesses to go bankrupt very quickly.

For example, say you expect to be making £1,000 a week in sales revenue by your second week of business. Your financial plan relies on this for you to pay rent and buy supplies. If it gets to that week and you’re only making £500, you’ll not be able to pay the bills that allow your business to operate. 

To avoid these problems, try lowering your expectations. Even if you think you have a fantastic product idea, it’s better to prepare for the worst than plan for the best and run into trouble. If you create a conservative financial plan that expects some success but accounts for things like low sales, your business plan is much less likely to fail. 

One of the biggest parts of your business plan is the financial aspect. To create a business plan that’s unlikely to fail, you’ll need to make sure you have a good understanding of accounting and a way to track how you’re spending your money.

The Countingup app offers built-in accounting software with its business account so that you can manage all your financial data in one place. 

With additional features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here .

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1. Financing Hurdles

2. inadequate management, 3. ineffective business planning, 4. marketing mishaps.

• Small Business Failure FAQs
• Small Business
• How to Start a Business

The 4 Most Common Reasons a Small Business Fails

Running a small business is not for the faint of heart

Running a business is not for the faint of heart; entrepreneurship is inherently risky. Successful business owners must possess the ability to mitigate company-specific risks while simultaneously bringing a product or service to market at a price point that meets consumer demand levels.

While there are a number of small businesses in a broad range of industries that perform well and are continuously profitable, about 33% of small businesses fail in the first two years, around 50% go belly up after five years, and roughly 33% make it to 10 years or longer, according to the Small Business Administration (SBA) .

To safeguard a new or established business, it is necessary to understand what can lead to business failure and how each obstacle can be managed or avoided altogether. The most common reasons small businesses fail include a lack of capital or funding, retaining an inadequate management team, a faulty infrastructure or business model, and unsuccessful marketing initiatives.

Key Takeaways

• Running out of money is a small business’s biggest risk. Owners often know what funds are needed day to day but are unclear as to how much revenue is being generated, and the disconnect can be disastrous.
• Inexperience managing a business—or an unwillingness to delegate—can negatively impact small businesses, as can a poorly visualized business plan, which can lead to ongoing problems once the firm is operational.
• Poorly planned or executed marketing campaigns, or a lack of adequate marketing and publicity, are among the other issues that drag down small businesses.

A primary reason why small businesses fail is a lack of funding or working capital . In most instances a business owner is intimately aware of how much money is needed to keep operations running on a day-to-day basis, including funding payroll; paying fixed and varied overhead expenses, such as rent and utilities; and ensuring that outside vendors are paid on time; however, owners of failing companies are less in tune with how much revenue is generated by sales of products or services. This disconnect leads to funding shortfalls that can quickly put a small business out of operation.

A second reason is business owners who miss the mark on pricing products and services. To beat out the competition in highly saturated industries , companies may price a product or service far lower than similar offerings, with the intent to entice new customers.

While the strategy is successful in some cases, businesses that end up closing their doors are those that keep the price of a product or service too low for too long. When the costs of production, marketing, and delivery outweigh the revenue generated from new sales, small businesses have little choice but to close down.

The Small Business Administration (SBA) helps small businesses find loans for different needs, offering a variety of loan programs.

Small companies in the startup phase can face challenges in terms of obtaining financing in order to bring a new product to market, fund an expansion, or pay for ongoing marketing costs. While angel investors, venture capitalists, and conventional bank loans are among the funding sources available to small businesses, not every company has the revenue stream or growth trajectory needed to secure major financing from them. Without an influx of funding for large projects or ongoing working capital needs, small businesses are forced to close their doors.

To help a small business manage common financing hurdles, business owners should first establish a realistic budget for company operations and be willing to provide some capital from their own coffers during the startup or expansion phase.

It is imperative to research and secure financing options from multiple outlets before the funding is actually necessary. When the time comes to obtain funding, business owners should already have a variety of sources they can tap for capital.

Another common reason small businesses fail is a lack of business acumen on the part of the management team or business owner. In some instances, a business owner is the only senior-level person within a company, especially when a business is in its first year or two of operation.

While the owner may have the skills necessary to create and sell a viable product or service, they often lack the attributes of a strong manager and don't have the time to successfully oversee other employees. Without a dedicated management team, a business owner has greater potential to mismanage certain aspects of the business, whether it be finances, hiring, or marketing.

Most small businesses start out with the entrepreneur's savings or money from friends and family and then look for outside financing to grow.

Smart business owners outsource the activities they do not perform well or have little time to successfully carry through. A strong management team is one of the first additions a small business needs to continue operations well into the future. It is important for business owners to feel comfortable with the level of understanding each manager has regarding the business’ operations, current and future employees, and products or services.

Small businesses often overlook the importance of effective business planning prior to opening their doors. A sound business plan should include, at a minimum:

• A clear description of the business
• Current and future employee and management needs
• Opportunities and threats within the broader market
• Capital needs, including projected cash flow and various budgets
• Marketing initiatives
• Competitor analysis

Business owners who fail to address the needs of the business through a well-laid-out plan before operations begin are setting up their companies for serious challenges. Similarly, a business that does not regularly review an initial business plan—or one that is not prepared to adapt to changes in the market or industry—meets potentially insurmountable obstacles throughout the course of its lifetime.

To avoid pitfalls associated with business plans, entrepreneurs should have a solid understanding of their industry and competition before starting a company. A company’s specific business model and infrastructure should be established long before products or services are offered to customers, and potential revenue streams should be realistically projected well in advance. Creating and maintaining a business plan is key to running a successful company for the long term.

Business owners often fail to prepare for the marketing needs of a company in terms of capital required, prospect reach, and accurate conversion-ratio projections. When companies underestimate the total cost of early marketing campaigns , it can be difficult to secure financing or redirect capital from other business departments to make up for the shortfall.

Getting your company's name in front of your customers is a crucial aspect of any early-stage business. It is necessary for companies to ensure that they have established realistic budgets for current and future marketing needs.

Similarly, having realistic projections in terms of target audience reach and sales conversion ratios is critical to marketing campaign success. Businesses that do not understand these aspects of sound marketing strategies are more likely to fail than companies that take the time to create and implement cost-effective, successful campaigns.

What Is the Small Business Failure Rate?

Approximately 33% of small businesses fail in the first two years, 50% fail within five years, and 33% make it to 10 years and further.

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Small Business Administration. " Frequently Asked Questions ," Page 2.

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4 Common Reasons Strategies Fail

• Andrea Belk Olson

Stop blaming execution, and start identifying the underlying flaws.

Just because a strategy is formulated, doesn’t mean it’s ready for hand-off to the front-line for execution. Instead of reactively addressing failures during implementation, leaders need to examine whether the strategy was on solid footing in the first place. This requires stripping away assumptions to avoid four core errors, which often plague a strategy’s feasibility for being put in practice: 1) not understanding the problem; 2) not understanding the organization’s capabilities; 3) not understanding the immovable pressures; and 4) not understanding the cultural landscape. Examine whether the strategy considers the context in which it must be executed, as this is where uncertainty proliferates, and address potential pitfalls preemptively. This will ensure the team has the tools to deliver the hoped-for results. Successful strategy execution is a product of the fastidiousness of the plan itself.

Business strategies often fail. This is well-know by now: According to studies , some 60–90% of strategic plans never fully launch . The causes of derailment vary widely, but execution consistently bears the blame. While that can be — and perhaps often is — a fair diagnosis, it isn’t the whole story. The strategy design itself can be the real problem, however difficult that might be to admit.

• Andrea Belk Olson is a differentiation strategist , speaker, author, and customer-centricity expert. She is the CEO of Pragmadik, a behavioral science driven change agency, and has served as an outside consultant for EY and McKinsey. She is the author of 3 books, a 4-time ADDY® award winner, and contributing author for Entrepreneur Magazine , Rotman Management Magazine, Chief Executive Magazine , and Customer Experience Magazine .

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7 Reasons Why Strategic Plans Fail (and how you can avoid them)

Jessie Published on 28 August 2013

Back to blog

Agile Project Management

Resource Planning

This is part of a blog series with practical tips on how to be more productive, cultivate creativity and growth within your company, and nurture a vibrant culture among your teams.

There’s an old saying that if you fail to plan you plan to fail . This certainly holds true in the project management world, in our daily business endeavors, and in our personal lives.

Consider setting out on a weekend drive to the countryside without first planning your trip: deciding on your ultimate destination, finding a map, checking weather and road conditions, estimating the amount of time it’s going to take to get there and how many stops you’ll likely need or want to take along the way, for instance. Of course, unexpected events such as delays due to road work or other reasons can, and most likely will, require you to deviate from any anticipated plan.

To get to your destination, you’ll need to know what’s in and what’s out for your drive (scope), have some kind of idea of how you’re going to get there (a road map), who is joining you for the trip, who is driving, and most importantly, who’s bringing the snacks (resources), and you’ll need an estimation of time and cost prior to leaving the house. It usually helps if you have some ideas about what will happen if roadblocks or other delays impede your course (contingency plan). 

Why plans fail

The same analogy can be applied to strategic initiatives and project plans. With so many factors, it can certainly be difficult to estimate plans accurately. However, there are plans and there are plans . There are plenty of reasons why bona fide project plans can and do fail. The good news is that these can be addressed preemptively with project management tools that help you reduce the likelihood of a nuclear meltdown.

Here are some reasons why strategic initiatives and plans fail.

1. Unrealistic goals or lack of focus and resources

Strategic plans must be focused and include a manageable, clearly defined number of goals, objectives, and programs. Adequate resources to accomplish those goals and objectives outlined in the plan must be adequately allocated.

According to a study , effective communication methodologies enable project teams and organizations to increase quality, scope, and business benefits success. When planning a project, the scope must be comprehensive, detailed, and crystal clear to team members, stakeholders, and, preferably, to the entire organization to lay the foundation for its success. Implementing a holistic planning process, building a realistic business direction for the future, and employing effective communication channels among teams greatly improves the chances for successful implementation of your overall business strategy.

2. Plans are overly complex

We all know someone who is a plan over-engineering extraordinaire. They write pages and pages of text, mix in complex, overly detailed charts and diagrams, and create a schedule with so many contingencies and restrictions that it becomes virtually impossible to follow — let alone implement — by the project team.

If strategic initiatives aren’t capable of being effectively communicated because of their complexity, then team members cannot be expected to carry them out as intended. 

3. Financial estimates are significantly inaccurate

Cost estimating: art or science? All too often, projects proceed with little more than a general estimation of what sorts of resources are needed (this holds true for estimating required people-power, too). The further along a project is allowed to proceed without adequate financial controls and checks in place, the higher the overall costs involved. This can include more than just bottom line financial costs, but can also extend to customer satisfaction and your perceived reliability as a business and team.

4. Plans are based on insufficient data

Often — and particularly in the software development realm where Agile processes have been implemented — relevant project data is scarce at the initial planning stages. Without a proper tool in place to help teams flexibly modify plans as a project evolves and more information becomes available, this often encourages plans that are too high-level or overly broad (and vague).

If plans are based on wrong assumptions due to insufficient — or misunderstood — data, they drive the project towards disaster from the outset, particularly if there is no Plan B in place and no means with which to easily modify the plan before the project slides out of control.

5. Inflexible/undefined team roles and responsibilities

Often times, project managers and team members are considered primarily delivery (wo)men. They’re handed a project plan, and informed that their performance will be measured based on how well the project delivers against that designated plan. If they question the assumptions, estimates, or the general approach set forth in the plan, they’re instructed to “just get on with it,” as expectations have already been set. Guess who will likely be blamed if plans fails?

While it’s imperative that everyone involved in a project understands from the outset what their work is, how it fits into the project as a whole, and to whom they will be reporting, it’s also important that there be mechanisms by which their feedback is factored into the planning and project processes, particularly as changes in project circumstances require.

6. Staffing requirements are not fully understood

Resource planning is a crucial part of the project planning process, and, if not carefully implemented, incorrect assumptions and estimates made regarding human resource requirements, including the number, role, skill, and timing perspectives can impact project timeframe and overall bottom line costs. After all, plans depend on the resources who deliver them. Data and information is crucial both at the planning stages, and throughout the project process, to monitor availability and project status, and to make any necessary course corrections.

7. Project scope inflexible to changes

Experience tells us that simply because a plan has been implemented and everyone has agreed to it doesn’t mean that all will go as expected. It’s never a good thing when the scope of a project changes and it can usually be avoided through proper planning. But being adaptable and having a “Plan B” in case it does happen along the way is imperative to help attain the overall project goal.

How can you keep your plans from failing?

Considering there are so many reasons why plans can fail, one might wonder why ever plan at all. For one, mapping out a plan before embarking onto its implementation has plenty of benefits. It enables better organization . It allows for a better understanding of objectives and their alignment with broader organizational goals, but it also helps identify and take into account any impediments that exist in reaching those objectives.

Planning helps reduce, and even eliminate, uncertainty, improve efficiency of operations, and find smarter ways to complete project tasks and deliverables. Studies have shown that organizations that have adopted project portfolio management (PPM) solutions , including effective project management tools to help manage projects and the portfolio, and also conduct ongoing reviews of these projects see an increased likelihood of portfolios that meet schedules, scope, quality, budget, time, and business benefits.

Well-defined project planning also provides a basis for monitoring and controlling work on the project, which is crucial to staying on top of schedules, milestones, costs, risks, and issues.

Employing effective software measurement tools therefore becomes essential, not only for early forecasting and estimates, but for measuring compliance and identifying trends and deviations along the way.

• PwC Insights and Trends: Current Portfolio, Programme, and and Project Management Practices (2012)
• The Forrester Wave™: Project/Program Portfolio Management, Q4 2012
• Guerrilla Project Management: Do you make these 7 test planning mistakes?

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Subscribe for exclusive access, why do businesses fail here are solutions for 10 common causes..

Written by Grant Olsen | February 2, 2022

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There are all kinds of conflicting statistics and opinions for why businesses fail . The headline of one report might proclaim that “90% of businesses fail in the first 3 years,” while another asserts that by following their tips, “You can enjoy a 90% chance of success.”

It’s difficult to accurately aggregate the numbers and find global statistics on business failures, so we’ll use the United States as a microcosm for trends that are also relevant in Australia, New Zealand, Canada, the UK, and other parts of the world.

Here’s a look at survival rates when viewed at the end of the first, fifth, and tenth years:

• 80% of businesses survive their first year
• 50% of businesses survive 5 years or longer
• 33% of businesses survive 10 years or longer

While these statistics highlight the fact that there’s certainly a risk of failure, they’re higher than some of us might expect. Anytime you’re looking at a vast collection of disparate individuals attempting something difficult, you’re going to see similar trends.

For example, let’s look at how many first-time college students seeking a 4-year degree stay the course all the way to graduation day:

• 33% of students graduate with a bachelor’s degree in 4 years
• 57% of students have graduated with a bachelor’s degree by 6 years

Some of the remaining 43% of students who didn’t graduate within 6 years will likely go on to attain their degree in later years, but it’s too inconsistent of a number to show up in most studies. For thousands of different reasons, hundreds of thousands of students fail to attain their bachelor’s degrees.

So the percentage of businesses that survive 5 years or more is strikingly similar to the percentage of students who earn a degree by 6 years. Sure, things happen that derail many of the businesses and students. But at least half of them are still standing after 5-6 years.

Why Small Businesses Fail to Change

Just as many of those students who earned degrees switched majors during their college experience, it’s critical for business owners to maintain flexibility in their structure and operations. If the COVID-19 pandemic has taught us anything, it’s the immense value of a well-time pivot. Whether your change is compelled by a new idea or the pressures of the times, never hesitate to innovate.

As Dan Fries explains :

Sometimes a crisis, while always tragic, can force some positive effects. It might not feel like that right now, but by responding to COVID-19 will teach you some valuable skills. In other words, this is not the only crisis you are going to face as your business grows, and the lessons you learn in the next few months will be extremely useful when it comes to scaling your startup further down the road. In fact, some of the tools and processes above are likely to be relevant long after the current pandemic has passed.

When businesses embrace this open-minded approach, they usually find themselves among the 50% that are still strong after 5-10 years. As the old saying goes, “If you’re flexible, you’ll never get bent out of shape.”

Yet many business owners remain rooted in their old ways. It’s understandable that they believe in their products or services, and are attached to the business model. After all, it was these elements that inspired them to take entrepreneurial risks in the first place.

But if you love something, you need to take care of it. And part of nurturing your business is being willing to change directions when outside pressures are threatening it. Stubbornness can be mildly amusing in childhood friends or cranky great-uncles, but it can be devastating for a business.

Why do businesses fail when they resist change? Because they’re refusing to acknowledge the primacy of the customer. Let’s review a few examples of roadblocks to success that arose during the pandemic, and how they all connected back to the role of the customer:

• Lockdown prevents a restaurant from serving customers inside the building. This scenario has played out again and again in nations around the world. It presents many dilemmas, but none larger than the inability of a business to directly serve its customers. Successful restaurants found ways to provide new pickup and delivery options, serve their communities, and even send meal kits by mail. They kept providing a quality product, though it might’ve looked much different.
• The supply chain is disrupted. The inability to source the materials or ingredients necessary for your current model is problematic. But the main issue is that it prevents you from delivering what your customers are seeking. If replacements couldn’t be found for the supply chain, a pivot was required. For example, a bakery that couldn’t source eggs might stop selling baked goods and begin selling dry mixes to customers.
• Depleted finances make it harder for customers to make purchases. With customers in many areas struggling to meet financial obligations such as rent and mortgages, it’s no wonder that some had to curtail purchases. By finding ways to lower costs so you can lower your prices, introducing tiered pricing, or creating new product options altogether to meet your customers’ needs, successful businesses continued to meet the needs of those who historically had depended on them.

Whether you’re struggling with cash flow issues or have a broken supply chain, your ability to deliver for your customers will always be the real issue. And discovering new ways to meet their needs will always be the real solution.

The fact is that pandemics will emerge, trends will evolve, and economies will fluctuate. So if you insist on moving your business forward in the exact same way regardless of these external factors, you’ll instead find your trajectory rapidly nosing downward.

The alternative is to commit to meeting your customers’ needs no matter what occurs. While it won’t guarantee a smooth journey, this North Star will guide you through all manner of catastrophes and downturns.

9 More Reasons Why Businesses Fail

We’ve identified the inability to adapt to their customers’ needs as a major contributor to businesses that go under before reaching their 1-year, 5-year, and 10-year anniversaries. When your customer is kept at the forefront, all your other efforts will steer you in the right direction.

But there are many other specific risks facing young businesses. These are risks that you should anticipate early and be on the alert for as time goes on.

With that in mind, let’s now look at 9 other reasons why businesses fail:

1. Poor Planning

Coming up with a great business idea is only the first step because it can’t go anywhere unless it’s supported by a solid plan . Outline where you’ll go in your first month, first 3 months, first year, and first 3 years. Make the milestones measurable so that you’ll know if you’re on track.

Of course, things will occur that necessitate updates to your plan. But the point is that you have a master document that outlines how you’re going to stand out from the competition, how you’re going to deliver value to customers, how you’re going to build your culture, and how you’re going to ultimately thrive.

2. Hiring the Wrong People

We get it—there’s a lot of pressure to build your team in a timely manner so that you can launch a business. But rushing this stage can kill your chances for long-term success.

You need to find people who believe in what you’re doing and have the skills to improve the ways you’re doing it. In the crucial early stages of a business, negative employees can quickly sink morale and overall performance.

3. Failing to Foster a Good Culture

As you assemble your team, communicate openly about the culture you’re seeking to build. Ask their opinions and make a point of incorporating new ideas from your team. The businesses that prioritize profits over people or have a leaders-versus-employees dynamic often fall by the wayside because their toxicity trickles right out of the office and can be sensed by suppliers, partners, and ultimately, customers.

4. Growing Pains

Plenty of defunct companies launched with a strong culture but lost it as the company scaled. There’s obviously no way to maintain all your team’s perks and traditions as new employees swell the ranks, but you can keep the heart of who you are.

Make sure that you continue seeking your team’s input and act on their ideas. New hires will bring innovative suggestions to make things better, while the old guard can share the things that you should most think about retaining.

5. Failure to Stand Out

Even if your business idea is a gem, you’ve still got to communicate it effectively to your audience. Otherwise, you’ll just get lost in the shuffle.

Using the market research from your business plan, craft a unique selling proposition that boldly articulates what makes you different from the rest. Questions to answer include:

• What unique value do I offer?
• Why is my solution better for customers?
• How can I communicate these important differences?

The more you can differentiate your brand, the better your chances for success.

6. Not Focusing on the Essentials

Plenty of businesses lose their way in the first year as distractions pull them from the very things that give them a competitive edge. For example, if your quirky product packaging is beloved by customers, don’t ditch it as your business grows. Instead, find ways to make the packaging more efficient so that it complements your efforts to scale.

When your business stays focused, you’re better able to deliver on your unique selling proposition and to adapt to unforeseen bumps in the road.

7. Not Controlling Expenses

Launching a business is expensive. And growing that business involves a whole new set of financial demands. So it’s understandable that many businesses struggle to keep up with the pace.

You’ll put yourself in a much stronger position by carefully watching your expenses . If something doesn’t help you deliver an even better experience to your customers, it might not warrant the cost. This goes for everything from Netflix on the breakroom television to the vehicles you rent on business trips.

8. Not Managing Inventory

Balancing acts are hard enough for any person, which is why those who perform on the trapeze are referred to as “artists.” But business owners must control the inventory so they don’t lose sales from insufficient numbers or burn through capital by allowing too much inventory to pile up.

You can avoid these fates by investing in inventory management software that helps you track items through the supply chain, in your warehouse, and all the way to final deliveries .

9. Inadequate Profit Margins

It’s possible to bring in substantial revenue and still find yourself in financial danger. One of the factors that have claimed many young businesses is inefficient processes and poor pricing strategies that lead to low profits.

Your business provides distinct value to customers, so you should feel confident setting prices that reflect this fact.

Get the Skills That Won’t Let Your Business Fail

Want more strategies to help your business excel? We’ve prepared a library of free business courses that cover everything from finance to negotiations to advertising. Taught by proven entrepreneurs from a range of industries, they provide the type of insights that usually take years to acquire. In this way, you can fast-track your success and avoid many of the threats that impact other businesses in their early years.

About Grant Olsen

Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

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9 Major Reasons Why Businesses Fail by Year 2 and How to Avoid Them

Posted january 28, 2021 by jake pool.

According to the Bureau of Labor Statistics, over thirty percent of private companies fail within two years.

Of course, there are external factors that businesses have no control over. Sadly, the COVID-19 Pandemic is a prime example of one. Since such events are unavoidable, let’s focus on internal factors that companies can act on.

9 common issues to avoid when running your business

As a new business owner, what are the traps to avoid from the start? And what can you do to stay in business? By understanding the following pitfalls you can hopefully avoid them and keep your business running smoothly for far longer than 5 years. Let’s dive in.

1. Insufficient funds due to weak forecasting

Without a doubt, poor financial forecasting is the main reason businesses fail.

It is relatively easy to plan fixed costs such as rent, payroll, utilities, hardware, etc. Entrepreneurs should vet this out extensively when writing their initial business plan.

However, it can be more challenging to forecast revenue generated from sales . Many new business owners are overoptimistic in their planning and vision. This results in an inability to amortize (pay off) an initial investment. Thus, the business fails.

Similarly, companies may be tempted to launch their product or services at a cheap price to be competitive. While it can work in the short-term, it’s not a sustainable business model. Once you start with a low price, it’s difficult to increase.

Goals should be ambitious, but attainable. And the budget should reflect accordingly.

2. The business lacks value

The success of any business hinges of its value. It might sound obvious, but it’s not that easy. As a business owner (or future), you probably think your product or service is great. But it’s not enough.

Before launching a business, always do extensive research (there is a lot of data available) on your target audience. Benchmarking and surveys are also a must.

Here are some generic survey questions to ask:

• Would you talk about this product or service with others?
• Have you ever heard of a similar product or service?
• How much would you pay for this product or service?

If your product is only valuable to you or a small group, or it doesn’t offer more value than your competition, it’s time to rethink things.

3. Inadequate business plan

As mentioned in the first point, budgeting is a key element of a business plan . But it’s not the only factor within the plan that will break a business.

A good business plan should include:

• A comprehensive description of the business
• Workforce needs and compliance (current and future)
• SWOT analysis
• Benchmarking Analysis
• Marketing Plan

But a solid initial business plan isn’t enough. Business owners should review and modify it regularly to keep with the pace of the industry and assess internal goals.

Many failed businesses in this scenario end up listed on business marketplaces like UpFlip because there are entrepreneurs out there equipped to change a poor business plan.

4. No connection with the target audience

The first questions any business owner should ask are — Do I know my target audience and do I understand what they need and want?

If you can’t answer those questions, it’s time to conduct more surveys and research. Otherwise, there is a disconnect, and the business will ultimately suffer and fail. It seems like a bold statement, but the biggest part of a purchasing decision is emotion.

Your product or service may have wonderful features and even value, but if it doesn’t connect with your target audience on an emotional level, it will fail.

For example:

If you run an office furniture business, obviously, the technical aspects of your premiere desk chair would be a sales point. But sturdy wheels and a comfortable backrest won’t differentiate you from the competition. 

Yes, you sell a chair. But also sell the idea of success, professionalism, or even luxury. The target audience must connect with your product on those levels. Otherwise, the business won’t stand out.

5. Competition is too stiff

Even with a comprehensive benchmarking analysis in the initial business plan, competition can evolve quickly. In many industries, there are new players every day in their respective markets.

To avoid failure, benchmarking must be a continuous effort. If your competitors are too big, it’s in the business’s interest to find a niche or some form of added value to your products or services.

Take TOMS Shoes , for instance. They broke into the highly competitive world of mid-level shoe sales by offering a socially conscious selling point to the value of their shoes. For every purchase, they give a pair of shoes to a child.

Note how their model also connects with their target audience at an emotional level.

6. Poor management

The success of a business comes from the top down.

Small business owners are often the only managers within a company. While it may work sometimes, it’s advisable to form a proper management team or at least hire a general manager.

Business owners don’t always have the necessary skills or time to be a good manager. Poorly managing or overlooking certain aspects of the business like human resources, marketing, or accounting can have a disastrous effect.

It’s important to learn to delegate to avoid wearing too many hats.

If you don’t have the money or infrastructure to hire full-time help (or in-house), think about outsourcing certain management tasks to a qualified freelancer via Upwork or a similar platform.

Otherwise, someone who can manage the company will soon take over.

7. Lack of a company culture

There is no happy company without happy employees. You may have a great business model and entrepreneurial skills, but the success of the company also depends on the staff.

It’s key to outline and implement a strong company culture from the beginning. And make sure that the people hired align with it.

Once in place, feed and maintain the culture mentality. Otherwise, you risk issues with high turnover. This has led to the internal collapse of many businesses in a shorter time span than two years.

8. Ineffective sales funnel

Getting leads is essential for any company, but your leads are worthless if they don’t convert. Many new companies focus on collecting data and leads and fail to nurture them properly.

To avoid bloating your sales pipeline , you need an effective sales funnel from beginning to end (and beyond!). It could vary depending on the industry, but be sure to nurture your leads as long as needed to complete the sale.

In the ideal sales funnel, leads convert when ready and become ambassadors of the brand. With a quality, automated system, you can sit back and watch it happen.

Here are a few ideas on nurturing leads:

• Send industry-related freebies (How-to Guides, Tools, White papers)
• Share relevant blog articles based on interest (personalization)
• Wish them a Happy Birthday! (Gift, Voucher)
• Set up a referral program with incentives
• Engage with leads on social media
• Use chatbot technology to answer FAQs when unavailable
• Newsletters (Old fashioned, but efficient!)

In other words, create and maintain a relationship even after the sale!

9. Bad marketing

In the early stages of a business, marketing is crucial. The key is to find the right balance between a reasonable budget and efficiency. Fortunately, this is possible thanks to digital marketing.

The two biggest advantages to investing in digital marketing campaigns are cost efficiency and measurable results (as opposed to traditional marketing methods such as print or tv advertising).

When setting up a marketing campaign, define the target audience, budget, and a realistic conversion rate. Again, if you need help, think about outsourcing for Google Ads or social media campaigns .

Many companies fail because of an inefficient marketing plan that allocates funds to ineffective channels or to ineffective content. And when it’s too late, it’s difficult to redirect funds to make up for the loss.

Awareness is key

As stated, some external factors that negatively affect a business are unavoidable, but there are many internal factors business owners can act upon to prevent failure. The first two years are critical to creating a perennial business.

Be aware of these reasons and don’t become a statistic!

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Why Do Some Businesses Fail?

Small business owners must mitigate company-specific risks while also bringing a complete product or service to market at a competitive price point for their target customer base. There are also cash flow strategies to navigate, employees to hire, invoices to pay, and many other considerations that go into running a successful business.

Managing these details can be especially daunting for startup business owners. Small businesses across a broad range of industries obviously perform well and maintain profitability, yet 18% of small businesses fail within their first year and 50% go out of business within five years. Approximately 65% of small businesses don’t make it to their 10 th year in business. [1]

Once any financial, personal, market, competitive and/or operational risks are addressed, small business owners can enjoy the unique rewards of entrepreneurship. Those benefits range from unlimited income-producing opportunities, the ability to “be your own boss,” and the pride of ownership that comes with building your own company.  

5 Reasons Small Businesses Fail

To best prepare for the rigors of starting and running a sustainable business, entrepreneurs should be aware of the potential risks, determine which of them are most relevant to their own personal situation and then plan accordingly. Here are five reasons why most small businesses fail and some advice on how to avoid these risks:    

• Lack of a solid business plan. Ben Franklin once said, “If you fail to plan, you are planning to fail,” and nowhere is this more evident than in the business arena. In fact, the National Federation of Independent Business (NFIB) says companies that put a plan in place early stand the best chance of success. Entrepreneurs use their business plans to outline their goals and objectives, secure funding, identify their potential markets, and track progress and adjust accordingly. “It’s common for new entrepreneurs to start a business related to their expertise and previous employment, or a favorite passion, pastime, or hobby,” the NFIB says. “But detailed market research and a thorough evaluation of your competitors must be done during the planning process, and businesses must be prepared to adapt to market changes on the fly.” [2] At a bare minimum, the plan should include an executive summary, description of the business, marketing strategy, and financial projections.
• They can’t find the startup or growth funding that they need. According to Skynova®, an invoice template provider, half of all startups failed in 2022 due to insufficient funding or investor interest. “Nearly as many business owners simply ran out of cash,” the company says. [3] The NFIB concurs, and says that a lack of startup funds—or, being unable to come up with adequate financing—are both common reasons for business failure. “If you lack the cash or assets to start on your own, like most businesses, you will need to borrow,” it says.    
• Poor cash flow. According to SCORE [4] , 82% of all small businesses fail due to cash flow problems. When money gets tight, paying yourself, your bills, the payroll and other financial obligations can be extremely difficult. This is why companies of all sizes keep a close eye on cash flow, or the net cash and cash equivalents currently flowing both in and out of your business. SCORE’s strategies to avoid cash flow problems include developing a minimum viable budget, protecting your credit (i.e., in case you need a loan to cover the bases when money gets tight), effectively managing your inventory (for product companies), and maintaining cash reserves for lean times. 
• Inadequate management. It’s not at all unusual for a small business to be run by the same person who envisioned the idea, opened the company, and then worked hard to nurture and grow the entity over time. Along the way, that person probably wore a lot of hats: owner, manager, accountant, marketer - the list goes on. Unfortunately, this “chief, cook, and bottle washer” mindset can lead to one more reason why small businesses fail: lack of good leadership and management. “While the owner may have the skills necessary to create and sell a viable product or service, they often lack the attributes of a strong manager and don't have the time to successfully oversee other employees,” Investopedia points out. “Without a dedicated management team, a business owner has greater potential to mismanage certain aspects of the business, whether it be finances, hiring, or marketing.” [5]  
• Sometimes life just gets in the way. This “soft” risk that may not always show up on a business survey or report can impact a business’ lifespan. Because small business owners spend much of their time and effort on their companies, life-changing events like health problems, divorce, a new addition or a death in the family may adversely impact the business itself. In fact, when No Joke Marketing’s Michael Tasner asked over 100 entrepreneurs why their businesses failed, nearly 70% of them said their companies hurt their personal lives, or the other way around. To mitigate this risk, he suggests matching your business to your unique personality (e.g., he built a lifestyle marketing agency and designed its growth strategies around his lifestyle). He avoided trading off business success for life’s important experiences and garnered moral support from other business owners who may be dealing with similar issues or challenges. “Connect with like-minded people and share your personal and professional trials and tribulations,” Tasner adds. [6]   

When you know what small business owners have gone through to keep their companies afloat and headed in the right direction, you can better plan your own path to success. By understanding the financial, planning, and even the personal complexities associated with business ownership, you’ll be better prepared to tackle the challenges head-on, move past them, and increase your odds of long-term success.  

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Important Legal Disclosures and Information

1. Chamber of Commerce Team, Small Business Statistics, https://www.chamberofcommerce.org/small-business-statistics/  

2. NFIB, Why Do Small Businesses Fail?, March 20, 2017, https://www.nfib.com/content/resources/start-a-business/why-do-small-businesses-fail/#:~:text=Common%20reasons%20for%20failure%20include,selection%2C%20or%20even%20bad%20employees.  

3. Skynova, Why startups failed in 2022, https://www.skynova.com/blog/top-reasons-startups-fail  

4. Sutter, Brian, SCORE, The #1 Reason Small Businesses Fail - And How to Avoid It, https://www.score.org/resource/blog-post/1-reason-small-businesses-fail-and-how-avoid-it  

5. Horton, Melissa, Investopedia, The 4 Most Common Reasons a Small Business Fails, https://www.investopedia.com/articles/personal-finance/120815/4-most-common-reasons-small-business-fails.asp  

6. Tasner, Michael, Entrepreneur, 3 Reasons That Might Cause Your Small Business to Fail, and What to Do About Them, https://www.entrepreneur.com/leadership/3-reasons-that-might-cause-your-small-business-to-fail-and/374577 

These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions. This site may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.

PNC is a registered mark of The PNC Financial Services Group, Inc.

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20 reasons why small businesses fail and how to avoid them.

The failure rate of small businesses is significant—as many as 45% of start-ups don’t survive the first 5 years. 1 Exploding Topics, Startup Failure Rate Statistics . So why do so many businesses fail? The primary causes of business failure are cash flow problems, poor financial planning, and a lack of market awareness.

We’ll explore 20 reasons why small businesses fail so you can avoid common pitfalls and develop a strategy to help your business grow and thrive.

Key Takeaways 

• Most small businesses fail within the first 10 years.
• Common financial reasons include poor pricing strategies, insufficient funds, and cash flow.
• Creating a clear business plan can help small business owners avoid common failures.
• Understanding your target market is key to creating a good business strategy.

Table of Contents

• Lack of Planning
• Choice of Location
• Lack of Research
• No Business Plan
• Poor Pricing Strategy
• Insufficient Funds
• Cash Flow Problems
• Poor Debt Management
• Dependence on One Customer
• Inadequate Profit
• Competition
• Lack of Market Demand
• Unexpected Growth
• Lack of Experience
• Ignoring Customer Needs
• Poor Management
• Ineffective Marketing
• Lack of Innovation
• Forgetting the Customer
• Ineffective Leadership
• Frequently Asked Questions

1. Lack of Planning

A clear vision is key to successfully running your small business. Start by setting research-backed goals for your company: what benchmarks do you want to reach in your 1st year? In your 5th year?

Setting timelines helps you keep on track with your goals and helps you make adjustments if you find you’re not where you want to be. Create a strategy for your business growth and set up check-in points. 

For example, check in every 2 months to make sure you’re on track to reach your goals. This gives you a chance to follow up with what’s working well and change anything that needs to be modified to help you stay on track.

2. Choice of Location

Business location is one of the most important decisions you can make when setting up a new small business. If you provide in-person goods or services, you need to make sure that there’s enough local demand to support your business. 

Businesses like bakeries and shops often rely on foot traffic for success, so visibility is key. Other industries like lawn care require you to commute to your customers, so you’ll want to pick a central location to minimize transportation costs.

If you offer remote services, location is still important—if you have some flexibility, consider how business taxes vary between states and municipalities. 

It’s also important to consider how you might expand in the future. If you see yourself opening up a second location, look for an area that has room to accommodate your future business growth. 

3. Lack of Research

Understanding your industry, competitors, and target market is key to business success and survival. Research common pitfalls in your industry so you can understand the specific challenges your company might face.

It’s also important to learn about your competitors. See how your services and prices compare to theirs, and consider whether you can offer any niche contributions to set your business apart.

Learn what customers are looking for from your company so you can deliver tailored experiences. Some demands are evergreen (constant), while others vary with market trends—research can help you determine and predict market trends so you can stay on top of your customers’ needs.

4. No Business Plan

In addition to your overall vision for your company, you’ll need to create a clear and actionable business plan. This helps communicate your vision to investors and other team members. There are many resources available to help you create a business plan, including business plan templates .

Your business plan should include:

• A description of your company and what you offer
• A market analysis including threats and opportunities
• Competitor analysis
• Marketing plan, including target customer profile
• Budget and projected cash flow
• Scalable growth plan

You’ll want to regularly revisit this business plan and review the success of each strategy. If you find anything that’s not serving your business, catching that early and making the right adjustments can be the difference between failure and success.

5. Poor Pricing Strategy

Setting the right price is a delicate challenge, but it’s essential for surviving as a small business. You need to price high enough that you cover your costs and make a profit, but low enough that it’s still accessible to a large customer base.

Start by understanding the costs involved in delivering your product or service. Calculate all the materials and labor costs, then factor in your profit margin .

Next, compare your prices against competitors. When you first start out, you may not be able to match the prices and profits of more established companies. If you find your prices are significantly higher, you might need to decrease your profit margin slightly. 

Remember that even if you can’t exactly match your competitors, there are other strategies you can use to distinguish your business—competitor prices are a guideline, not a hard rule.

6. Insufficient Funds

Financing is a common challenge for new businesses, and it’s important to ensure you have sufficient funds right from the start. There are a range of financing options you can consider, from small business loans to investor support. Research all your options and compare how they’ll support you in the short and long term.

It’s also important to effectively manage your finances once you’ve acquired start-up capital . Make sure you understand all of your business costs including licenses, materials, taxes, and labor. Balance that against your projected profits to make sure you’ll be able to stay operative through the first few challenging years.

7. Cash Flow Problems

Financial management isn’t just about the big picture—it’s also about the way your business spends cash in day-to-day business operations. Make sure you keep track of all the ways your company spends money, from larger costs like rent and labor to everyday transportation costs.

It’s easy to get caught up in things like marketing and product development and run out of cash flow early on. Make sure you have a clear budget that you review regularly to ensure you have sufficient cash flow to manage your business.

8. Poor Debt Management

There’s more to small business financing than just start-up capital and cash flow: you’ll also want to stay on top of any debt and ensure your credit remains strong. If not managed carefully, these challenges can easily spiral out of control and sink a small business.

It’s not uncommon for new entrepreneurs to assume some debt as a new business—you might have taken a start-up loan as part of your initial process. However, that debt can become problematic if you’re not making enough profit to consistently make your payments.

One of the most common signs of impending debt issues for small businesses is delaying bill payments. If you find that your business is struggling to meet bills, debt , or credit card payments, it’s time to do a close examination of your finances and cash flow to see where you might be able to cut costs and get on top of any financing issues before they become a larger problem.

9. Dependence on One Customer

Building customer relationships is important, but it can be risky to become too reliant on just one customer. Even if that customer represents a large share of your current profit, there’s never a guarantee that they’ll be able to sustain your company.

Once you’ve found a great customer, analyze how you won that customer and see how you can apply those strategies to finding new customers. Consider what that client was looking for and how they found your company so you can understand what worked well in your next marketing campaigns .

Build a customer profile and focus your marketing on reaching clients who fit that profile. See if they tend to live in a certain area, frequent a certain job or social media platform, or search for particular keywords. Try to diversify your customer base so you aren’t reliant on just one client for your business survival. 

10. Inadequate Profit

Most small businesses have low profits in their first few years, but there’s a point where those profits can become too low to survive. If you find that your profits aren’t enough to cover your expenses , it’s time to think about profit maximization strategies.

One of the first things to examine when you’re facing inadequate profit is your current cost management. Are there any areas where costs can be cut? Consider whether there are more affordable manufacturers, equipment options, or business spaces available to you.

You can also examine your pricing strategies. If you start by pricing low and you’re selling a large volume but still not making a good profit, your prices may be priced too low. Calculate how much you would have to raise your prices to make enough profit, and test out slightly higher prices to see how customers respond.

11. Competition

Even if you offer great products and services, it can still be hard to survive if you’re facing a lot of competition. Conduct a market analysis to see how many competitors are in your industry and area, what products they offer, and how their prices compare to yours.

Once you have a thorough understanding of your competitors, you can devise strategies to set yourself apart. This can include everything from offering competitive prices to providing a higher-quality product. You can also explore marketing strategies or consider how you can offer a slightly different product to fill a market niche.

12. Lack of Market Demand

Even the best businesses can fail if there’s no demand for their product. Market demand also fluctuates, so what’s in demand today can change by tomorrow. Keeping track of market trends and demand can help you stay ahead of the curve with what your company offers.

Start by assessing what’s currently in demand and how you can pitch your product to meet that demand. As customer needs evolve, you may need to slightly alter your products to adapt to changing customer needs.

13. Unexpected Growth

Growing your business is a hallmark of success, but it can also pose risks if you expand too rapidly without a clear plan. Unexpected growth can lead to over-extending your resources, overworking employees, and losing track of customers.

To prevent fallout from unexpected growth, it’s essential to have a scalable business plan. Make sure you can still deliver high-quality goods and services as you expand, so your customers stay satisfied. Keep track of how much money and labor you’re expending on new services so you can bring on new employees as you grow.

It’s all about striking a balance—you want to make sure you hire enough talent to keep up with growth but avoid hiring too early in case your growth slows down. Tracking your expenditures in relation to growth is the best way to create a plan for the future.

14. Lack of Experience

Successful business owners need vision and passion, but they also need experience to translate into their goals into a successful company. Lack of experience and industry knowledge can hold your business back, so it’s important to build a dedicated management team with a thorough understanding of the market.

A business mentor can help you manage the small business owner aspects of your company. Look for someone with experience managing their own business who can advise you on things like developing a business plan , hiring the right talent, and pitching to investors. 

It’s also important to bring on experts in your industry. Look for experienced financial advisors who can guide you through developing your financial strategies. You’ll build experience as you grow, but it’s a good idea to bring in experts for specific jobs like marketing and accounting.

15. Ignoring Customer Needs

The best source for understanding market demand is customers themselves. Responding to feedback helps you build strong relationships with your existing customers and helps you understand what you need to do to gain more customers.

Listen to customer feedback on pricing, services, accessibility, and any other concerns they may have. In some cases, you may not be able to accommodate every suggestion, but it’s helpful to respond and then do a cost-benefit analysis and see how making the recommended changes might impact your business.

If you feel like you’re not receiving customer feedback, consider reaching out. Comment and feedback forms after a completed order can be a helpful tool for gaining market analysis in real-time.

16. Poor Communication

Having a clear vision that you can communicate to investors and customers is important, but it’s just as key to having strong communication inside your business. When your team doesn’t understand your business goals, it’s harder for everyone to collaborate efficiently. 

If you’re operating your small business as a partnership, it’s fine to have different skill sets, but you need to be on the same page about vision and goals. Creating a business plan collaboratively can help ensure you agree on the primary strategies for your company.

Weak communication can lower morale and productivity and prevent your business from growing effectively. Consider making a modified version of your business plan that you can share with your employees. This can include an overview of your business goals and strategies to help everyone get on the same page.

17. Ineffective Marketing

Even with great products, your business can’t succeed unless you effectively reach your target market. Ineffective marketing strategies can hold you back from connecting with customers, while great marketing helps you reach new audiences and grow your business.

It’s important to have a targeted campaign with a clear focus. Start by identifying your target customers and learning about how they interact with local businesses. This helps you determine where to place ads, what to offer, and how to speak to potential customers.

Make sure your marketing strategy has a way to track results. That could include tracking impacts and clicks, measuring follow-through, and consulting with new customers to discover how they found your business so you can build on your most effective strategies.

18. Lack of Innovation

A great product at the start of your business may not remain competitive as the market changes. Innovation is essential for ensuring your business stays relevant and continues to be successful. 

This doesn’t mean you have to drop products if they’re still performing well, but it’s a good idea to consider how you can improve or develop new products if you have the capital to spend on development. This helps you stay ahead of the curve in a changing market.

Even with evergreen products, your business practices can still become stagnant. You’ll need to find new marketing strategies to reach new customers so that you can have a continuous revenue stream. Innovation spans all components of your business, from product development to new marketing methods.

19. Forgetting the Customer

Even if a product seems great to you, remember that in the end, it’s about the customer and how the product will meet their needs. Focus on learning about what the customer is looking for—what’s missing from current products, and how can your business satisfy that need.

If customers offer feedback, try to learn from that and incorporate it where possible. This can involve product innovation or customer service relationships. Customers will remember a great product, but they’ll also remember a personable and helpful business interaction.

Check-in with customers to make sure they’re fully satisfied with their experience. One way to do this is to send a follow-up email or form after their purchase. You can incentivize feedback by offering a small discount for filling out the form—this also encourages customers to return to your business.

20. Ineffective Leadership

While a great team and expert advice are important in supporting your business, it’s ultimately up to you to lead your company forward. If you’re burnt out or losing track of your vision, your team won’t know where to follow.

Strong leadership helps cultivate a positive company culture, a motivated team, and great client relationships. Your employees take their cue from you, so make sure to set a strong model for interacting with customers. 

Creating a good company culture starts with forging strong employer-employee relationships. Get to know your employees, their goals, and their challenges at work so you can help them perform their best. When you create a work environment that’s supportive and growth-oriented, it encourages your team to deliver their best work and help build your business.

The reasons why small businesses fail can include everything from poor pricing strategies to ineffective marketing. Learning how to recognize problems like poor management and inexperience can help you identify issues in your company before they impact your success.

Understanding and recognizing why small businesses fail can help you create strategies to avoid common pitfalls. Tools like FreshBooks accounting software can also help you manage your expenses and avoid problems like insufficient cash flow. Try FreshBooks free to discover an easy tool to help your small business thrive.

FAQs on Reasons Why Small Businesses Fail

Is it true that 90% of startups fail.

Yes, ultimately about 90% of startups fail. A few fail in the first year, and most new businesses fail in the first 2 to 5 years. After 5 years, businesses that survive tend to see a small rise in profits and growth.

Why are small businesses declining?

Some of the biggest reasons why small businesses decline are market competition, lack of demand, and lack of financing. In many cases, larger and more established companies make it difficult for new small businesses to enter the market.

What is the biggest problem facing small businesses today?

One of the biggest problems currently facing small businesses is inflation. High inflation rates mean higher input costs for products, and usually also mean employees will seek higher salaries. It can also mean higher interest rates when trying to secure a first business loan.

Why are small businesses failing in today’s economy?

Many small businesses are failing in today’s economy because they lack planning and financial preparation. While market competition and funding pose challenges to business owners, these can be overcome with financial preparedness and a clear business plan.

Article Sources: 

• Exploding Topics, Startup Failure Rate Statistics .

Sandra Habiger, CPA

About the author

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

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Home » The Tony Robbins Blog » Career & Business » 14 reasons why businesses fail

14 reasons why businesses fail

Learn more about business failure – and how to avoid it.

WHY BUSINESSES FAIL

So why do businesses fail ? What makes one entrepreneur succeed while another experiences business failure ? It comes down to a combination of preparation, strategies and knowledge. 

1. Not having an effective business plan

If you don’t have an effective business plan, you can’t properly communicate your vision to your team. Tony Robbins advocates not just having a business plan, but having a business map for entrepreneurs to take their small businesses to the next level. Your business map will help you master vital stages of the business cycle, like scaling. Explosive growth can be tempting, but not scaling in a mindful manner is one of the biggest reasons why businesses fail – you have to strike the right balance between growth and infrastructure.

2. Not putting the customer first

One of the top reasons why businesses fail is that they fall in love with their product instead of their customer. To circumvent business failure , fall in love with your client and figure out every single way you can meet their needs. Anticipate what they want, what they need and, when possible, determine what they might not even know they need yet. Turn your customer into a raving fan – somebody who will tell everybody about your product or service or company. Once you grasp that your customer’s life is your business’ life , you can truly envision how to succeed.

3. Not hiring the right people

Hiring the right people has a massive effect on nearly every area of your business. One of the most obvious examples is sales: If you don’t have enough sales, you can’t pay your team or yourself and you cannot grow. Confident salespeople are a key to increased sales. It’s also astounding how many businesses fail due to inventory mismanagement. Hiring someone who is skilled at inventory management or using a good inventory management software is an easy way to solve this issue.

4. Doing it all yourself

Yes, you are an entrepreneur, but that doesn’t mean you have to do everything on your own. A business is only as strong as the psychology of its leader – and the ability to let go and trust others is an essential leadership trait . If you need to control everything, it’s likely you won’t succeed over the long term. Delegating is a top skill to manage a business effectively : it helps you manage your time, focus your energy on what matters most and spot potential up-and-coming leaders within your company.

5. Lack of flexibility

Remember Blockbuster? Radio Shack? Tower Records? These giants of their industries all fell victim to the same reason for business failure : inability to adapt to a changing market . Entrepreneurs who fall in love with a service or product and refuse to change directions when the market demands it are likely to fail. The key to long-term success – in business and in life – is flexibility and a willingness to pivot when necessary.

6. Lack of innovation

Peter Drucker and Jay Abraham, among the greatest business minds of our time, maintain that business failure – and success ­– all starts with two key factors: innovation and marketing . Innovation means finding a better way to meet your clients’ needs than anybody else. Anybody can make some money for some amount of time. But if you want to become successful and sustain that success over years and over decades – if you want to build a brand – then you have to find a way to add more value than anybody else in the game. And that comes from constantly innovating.

7. Not understanding your industry

This is one of the driving factors behind why businesses fail to innovate. Certain industries require more innovation, while others may have different product life cycles. Consider the technology industry. The life cycle on an average product is about six months. And in some sectors, like the app business, it’s just one month. People expect continual innovation and improvement , and if you don’t deliver that to them, someone else will. It’s a different world we live in today, where the only constant is change. And if you aren’t staying ahead, you’re falling behind.

8. Fear of business failure

Business failure is one of the main , if not the biggest, fears of any business owner. If it weren’t for that fear, we wouldn’t even be asking, “ Why do businesses fail ?” However, as you develop your entrepreneurial and managerial skills, you will find that one of your greatest assets in running a successful business is overcoming your fear of business failure . Without minimizing the validity of your fears, you need to learn to view business failure as a learning opportunity rather than an insurmountable obstacle. Remember, life happens for you, not to you .

9. The wrong mindset

One of Tony Robbins’ central philosophies is that our mindsets create our realities ; what we believe influences what we are able to achieve. As entrepreneurs, when we embrace strategies for turning business failure into success, we transform our mindset from one of defeat into one of empowerment . And when we are empowered, a failing business is not the concluding chapter in our story; it is only the beginning. Don’t let your limiting beliefs disempower you. Instead, stay hungry in your search for success . Your hunger will inspire you and pay off in the end.

10. Lack of vision

Marketing guru Jay Abraham understands the question of why businesses fail. It’s a high-velocity and high-leverage mindset that prepares business owners to navigate the ever-changing seas of business. Rather than adapt your dreams to the economy, you must set and achieve your own goals, independent of circumstances. How can you accomplish this? By recognizing that business success hinges on loyalty to a vision .

11. Lack of passion

A passion-driven mindset lets you persist in honing your ethics and beliefs while learning from all the reasons why businesses fail . By adhering to your passions, you’re able to see your circumstances clearly – the positives and negatives. With this level of focus, you create an unstoppable drive to accomplish your goals. This focus allows you to take risks, acknowledging that feelings of doom and failure arise not from circumstances but from feeling stuck in the status quo. Don’t get stuck – persist.

12. Ineffective marketing strategies

Whether your company is large or small, marketing is the next critical step . Why do businesses fail in their operations? If you cannot find a way to market your product or service, then your business will have a hard time getting off the ground. Because the truth is, you could have the most innovative product or service, but the best product doesn’t always win. Do you think McDonald’s has the best burger? Probably not. But their marketing strategies are top-notch.

13. Not understanding your X factor

To market effectively and prevent business failure , you have to understand what your “X-factor” is . What are you here to deliver and how can you improve your customers’ lives? Take, for example, FedEx founder Fred Smith. Even in FedEx’s early stages when profits were slim, Smith invested in three market studies for testing the value expedited shipping would add to his product. Smith’s research paid off: He discovered his X factor and FedEx is now a household name, in large part due to its corner on the market via expedited shipping.

14. Asking the wrong questions

To help discover what your true value is as a business, go one step further and ask yourself the right questions . This includes core questions like: What does the marketplace need? Who is my customer? What can I do to make my company talkably different ? And perhaps one of the most important questions you can ask yourself is, “What business am I really in?” Let’s look at an example of a wildly successful company that needed to ask itself that very question: Apple.

How Apple came back from business failure

Today, everyone has heard of Apple. It’s one of the most valuable companies of our time, with a market cap of nearly $2 trillion and a stock that is soaring above its competitors. But it wasn’t always that way. Apple is actually the perfect example to look at when considering why businesses fail .

Apple’s founder Steve Jobs was fired from the company in 1985. Before re-hiring Jobs in 1997, the failing business operated at a loss and inched toward bankruptcy. In fact, Michael Dell was advising decision-makers to shut Apple down and give its shareholders their money back. But Apple persisted, and Steve Jobs asked himself one of the most critical questions in his lifetime: “What business are we really in?”

At first, the answer seemed obvious – Apple was in the computer business. But how were they supposed to win back customers when 97% of all computers across the United States were run by Microsoft?

That’s when they realized that no matter how good their product was, Microsoft was embedded and entrenched in the masses. After all, it was one of the main reasons Apple found itself in bankruptcy.

So Jobs asked, “What business do we need to be in?” And Apple decided that it needed to be in the business of connecting people to their passions – to their photographs, their music, to each other. When he did this, he avoided one of the top reasons why businesses fail : lack of flexibility.

Answering this question created one of the most life-altering shifts for Apple. The company transitioned into building basic, cool technology that connects people to what they love. Upon rehiring Jobs, the company arranged a partnership with Microsoft which signaled the company’s turnaround. When Apple launched the iMac just one year later, the firm returned to profitability and made its mark. Before long came the iPod and iTunes, then the iPhone. Their net sales soared. S ince that point Apple has never stopped innovating, and their marketing campaigns have propelled the company to an entirely new realm. Had Jobs viewed his firing as the death toll of his career (and company), the firm would have never experienced its revival.

Today, is Apple really in the computer business? Only 10.4 % of their business is computers, which means almost 90%  is not – the vast majority is made up of iPhone , iPad and Apple Watch sales. Honestly answering the question “ Why do businesses fail?” was vital for Apple to change course and become profitable.

If success is about innovation and marketing, then you have to decide who your customer is, what they need, what business you are in and what business you really need to be in. Answering these questions can change your entire business, because the answers will ultimately allow you to change your offer. As we say, change your offer, change your business – and change your business, change your life.

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7 reasons why some business plans fail.

Salmaan Mian

• August 23, 2021
• Business business plan business plans
• 7 Reasons Why Some Business Pl ...

Often enough, some business plans fail to achieve their objectives. Whether the plan is for securing a loan or investment or hiring new senior staff, there are few reasons why business plans fail.

This blog will examine the 7 main reasons why some business plans fail and what you should avoid doing when writing one.

Introduction

Business plans fail for various reasons. They have to be carefully thought out and well written with minimal mistakes. They should start with a great business idea and contain comprehensive market research and analysis. Sections on the operations, team and financials are also crucial and have to be well presented .

Many common mistakes can make business plans fail to achieve objectives . Business plans fail due to common mistakes range from spelling and grammatical errors to more fundamental issues such as a flawed business idea.

Business plans are different for each company, whether you are looking to create a business plan for a restaurant or a new tech start-up, you should tailor the business plan and avoid these common mistakes.

1)    Bad Business Ideas

One of the primary reasons why business plans fail is due to bad business ideas. Most ideas sound great in theory however sometimes they are simply not viable. Furthermore, some founders do not realise they have invested in a bad idea once it is too late.

To ensure that a business idea is feasible and can be turned into a reality, you should use product validation . Before officially launching the business, founders can do thisby approaching potential target consumers, potentially saving time and money.

2)    Inexperienced Team

Some business plans may present a strong argument for a new business and its need in the market. Instead, some business plans fail to present an appealing team that has the competencies and experience required to execute the business plan and successfully grow a business.

To ensure your business does not fail for this reason, you should create a detailed operations section in which details of the team are included. The section should highlight all the skills, experience, and expertise of the management team so readers also believe in them as well as their vision.

Investors will occasionally reject proposals from start-ups with inexperienced teams. Some investors want to be certain that your team has the relevant qualifications, capacity, and knowledge to manage the business. It is crucial to present an effective, capable, and complete team in a business plan to convince users this will be successful.

3)    Ineffective Executive Summary

The first section of a business plan will usually always be an executive summary. This section is should grab the reader’s attention and convince them to continue reading. However, having a bad executive summary can discourage users from continuing to read the business plan and cause it to fail.

Some users only read the executive summary which emphasises why it is so important to create a high-quality section. If the executive summary is weak, then it will leave a bad first impression for the users and make it difficult to recover from.

To create an effective executive summary , you should write it once the rest of the business plan is complete. This will allow you to summarise the entire document and create a captivating introduction for your users.

4)    Bad Financials

Financial forecasts are a key section of a business plan as they provide details on profitability, potential growth, and long-term vision for the business. The financials are usually the most interesting section of the entire document for investors and creditors. Pro-forma profit and loss statements, break-even, and return-on-investment calculations are all parts of the financials in an effective business plan .

If you fail to prepare a pitch deck and the financials in a business plan, investors are unlikely to take your pitch seriously so it is essential to focus on these sections if you are looking to raise capital.

Preparing financials will require time and research. They should be realistic, backed with research and accurate. It is important to clearly highlight these details as investors will also want to know what you will be spending their capital on.

5)    Spelling and Grammar Mistakes

Correct spelling, grammar, and punctuation are paramount when creating a business plan. Although users of a business plan do not expect business directors to be wordsmiths, they pick up cues about the underlying business and its owners by scrutinising a business plan. When they read a plan with spelling or grammatical errors, it could directly affect their decision.

Proofreading the document multiple times or hiring professional proofreaders will help avoid spelling, grammar, and punctuation mistakes. This will minimise mistakes and by extension, improve the appeal of the business and its directors. Software like Grammarly can also be used to correct spelling and grammar mistakes.

6)    Lack of Market Research

It is important to back your research with facts and statistics, it’s equally important to ensure your facts are true. Business plans should contain everything about your business your market, customer habits, competitors, size, and market share as well as overall market trends.

Often enough, some business plans fail if they do not contain adequate market research and analysis. You should prepare figures, charts, and statistics to support any assumptions or projections made.

Most investors and creditors will check your figures against the industry data for confirmation, so it is crucial they are correct and up to date. Investors will refuse to invest if their data does not match your market research and analysis.

7)    Poor Presentation

Even if your written content is flawless, the presentation has to match up. Presentation mistakes such as uneven margins, missing page numbers, charts and graphs without labels, or a missing table of contents can all put off potential investors or lenders. Rereading the document thoroughly can help correct these simple mistakes.

If in doubt, you should ask someone else to check your plan before presenting it to an investor or creditor. Remember that while you will spend significant time working on your plan, most readers will quickly read the document before they make an initial decision about it. This highlights the importance of having a neat presentation without obvious omissions.

A state-of-the-art pitch deck software, available on Android and iOS , could be used to improve your pitch deck presentation. The use of this software can significantly enhance your presentation when combining a pitch deck and business plan for investors.

What to avoid when creating a business plan

• Having an uninteresting executive summary
• Spelling and grammar mistakes
• Showing a lack of market knowledge
• Unrealistic financial projections
• Poor presentation

If you are worried that perhaps your business plan fails, you should seek professional help. Professional business plan experts can help guide you through the entire process by providing feedback, and presenting your plan in an attractive, professional, and effective structure.

Ultimately, to maximise your chances of successfully achieving your objectives with a business plan, you have to ensure a few key details. Firstly, you need a solid business idea with extensive market research and financial planning . You will also need to avoid making spelling and grammatical errors as well as present the business plan methodically. Although not a guarantee, following these details will significantly improve your chances of success.

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There are approximately 5.9 million SMEs operating in the UK, but making your business successful in the long-term is difficult. Recent ONS data shows that only 42.4% of businesses founded in 2013 were still active in 2018 .

So, how can you improve your chances of success? Something all business owners need to do is create a business plan . A good business plan is integral to the success of your business as it:

• Helps to clarify the direction of your business
• Can highlight problem areas that don’t make sense or need more work.

Many business owners will use their plan to persuade investors or lenders to fund their idea, but a business plan is not just something you write for external funders and then put away in a drawer when you think you no longer need it.

A good business plan should be an invaluable asset and guide to running your business, and should be something you constantly review and update as necessary .

But why do some business plans fail? For some people, it’s simply a matter of not investing enough time and effort into creating it. However, there are some common problems that can prevent a business plan from becoming successful. Here are seven areas where you might be going wrong.

1. Pursuing a bad idea

It can be hard to admit this, but sometimes business plans fail because the idea isn’t feasible. However much time you dedicate to creating a detailed plan, you first need to make sure your business idea is viable.

For example, you should make sure there is a market for your product or service. Conducting market research is vital for understanding the industry and your potential customer base, and will help you to create a business plan that is less likely to fail.

As well as having a good idea, you will need to research the competition. You could have a great business plan, but it won’t work out if it’s essentially a copy of an already successful and established business. You should consider how your business is different from anything else out there and why you are unique. It’s especially important to highlight this in your plan if you are looking for funding, as investors and lenders will need to be convinced of your idea’s potential for success.

2. Not having the expertise

When creating a business plan, you need to know what you are talking about! So, it’s crucial that you (or a business partner) have the relevant expertise and experience to be able to write a workable business plan, and then put your idea into practice.

3. Not being realistic

If you’re writing a plan for your new business venture, it is easy to get carried away and be over-optimistic about how much money you will make. However, this could be a fatal mistake and could cause your business plan to fail.

Business plans should be realistic about future growth and profits. Over-estimating your income is likely to cause problems further down the line, as you could reach a point where your expenditure is more than the money coming in. Being realistic from the beginning will help you to plan your budget accordingly and give your business plan a greater chance of success.

Don’t be afraid to set high targets in your business plan, with both short-term and long-term goals, but make sure they are achievable.

4. Assuming everything will go smoothly

Focusing on the strengths of your business plan and assuming everything will go perfectly is a mistake of many businesses. If your plan doesn’t factor in any potential future issues, then when you do hit a problem it will be much harder to overcome.

Good business plans will address the challenges your business may face, and then lay out strategies on how to minimise these risks and prepare for any unexpected events .

5. Neglecting the finances

Every successful business plan needs to include detailed financial projections.

Business owners will need to look at costs, trends, and their competitors to come up with realistic and achievable figures for their income and expenditure, which will give direction and structure to their business operations

It is very likely that these figures will change, but it is important to have some benchmarks to aim for. The figures will also highlight any major flaws with your business model (i.e. if you are spending more money than you make), so you can make any necessary changes to your budget.

If you want to use your plan to try to get funding, you will need to show how much money you require and what the funds would be used for.

6. Not checking the spelling and grammar

This may not seem as crucial as the other points but, especially if you’re looking to impress investors or lenders, your business plan should be accurate and without any mistakes.

An error-free business plan will make you appear professional, so make sure you review it and double check (and triple check) for any typos or mistakes.

7. Not believing in the plan

Finally, you need to be determined and fully believe in your business plan. You could have the best business plan in the world, but if you don’t put the time and work in to bring it to fruition then it will be destined for failure.

Creating a good business plan and not giving up when problems occur will give you a better chance of making your business plan a success!

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50 Reasons Why Some Businesses Fail While Others Succeed

THREE-PART SERIES: Part One

George Meszaros – Cofounder – Success Harbor 50 Reasons Why Some Businesses Fail While Others Succeed

Read Part 2 here and Part 3 here .

Why is it that so many businesses fail while so few succeed ?

One of the great mysteries of entrepreneurship is why businesses fail. Some people start one successful business after another while others fail to succeed.

Why some businesses fail while others succeed?

The worst part about a failing business is that the entrepreneur is unaware of it happening until it is often too late. It makes sense because if the entrepreneur really knew what he was doing wrong, he might have been able to save the business. Some entrepreneurs live in a land of denial while others are unaware of their mistakes.

One thing for sure, a business almost always fails because of the entrepreneur.

“ It’s not the plan that is important, it’s the planning. ” Dr. Graeme Edwards

There are over 28 million small businesses in the United States, according to the SBA.

It’s an impressive number. The sad reality is that only about 50% of them survive. What’s worse is that only about one-third survive 10 years or more. The life of an entrepreneur is unforgiving. It is a constant challenge. There are many moving parts. Anyone of them could put you out of business.

Businesses fail for many reasons. The following list includes some of the most common reasons:

1 – Lack of planning  – Businesses fail because of the lack of short-term and long-term planning. Your plan should include where your business will be in the next few months to the next few years. Include measurable goals and results. The right plan will include specific to-do lists with dates and deadlines. Failure to plan will damage your business.

2 – Leadership failure – Businesses fail because of poor leadership. The leadership must be able to make the right decisions most of the time. From financial management to employee management, leadership failures will trickle down to every aspect of your business. The most successful entrepreneurs learn, study, and reach out to mentors to improve their leadership skills.

3 – No differentiation – It is not enough to have a great product. You also have to develop a unique value proposition, without it you will get lost among the competition. What sets your business apart from the competition? What makes your business unique? It is important that you understand what your competitors do better than you. If you fail to differentiate, you will fail to build a brand.

4 – Ignoring customer needs – Every business will tell you that the customer is #1, but only a small percentage acts that way. Businesses that fail lose touch with their customers. Keep an eye on the trending values of your customers. Find out if they still love your products. Do they want new features? What are they saying? Are you listening? I once talked to the CEO of a training company who told me that they don’t respond to negative reviews because they are unimportant. What? Are you kidding me?

5 – Inability to  learn from failure  – We all know that failure is usually bad, yet it is rare that businesses learn from failure. Realistically, businesses that fail, fail for multiple reasons. Often entrepreneurs are oblivious about their mistakes. Learning from failures is difficult.

6 – Poor management – Examples of poor management are an inability to listen, micro-managing – AKA lack of trust – working without standards or systems, poor communication, and lack of feedback.

7 – Lack of capital – It can lead to the inability to attract investors. Lack of capital is an alarming sign. It shows that a business might not be able to pay its bills, loan, and other financial commitments. Lack of capital makes it difficult to grow the business and it may jeopardize day-to-day operations.

8 – Premature scaling – Scaling is a good thing if it is done at the right time.  To put it simply, if you scale your business prematurely, you will destroy it. For example, you could be hiring too many people too quickly, or spend too much on marketing. Don’t scale your business unless you are ready. Pets.com failed because it tried to grow too fast. They opened nationwide warehouses too soon, and it broke them. Even the great brand equity that they had built couldn’t save them. Within a few months, their stock went from $11 to $0.19.

According to a study of about 3200 high growth internet startups done by Startup Genome, about 70% of the startups in their dataset scaled prematurely.

9 – Poor location – Poor location is a disadvantage that might be too much to overcome. If your business relies on foot traffic, location is a strategic necessity. A poor location might make your customer acquisition costs too high.

10 – Lack of profit – Revenue is not the same as profit. As an entrepreneur, you must keep your eyes on profitability at all times. Profit allows for growth. According to Small Business Trends, only 40% of small businesses are profitable, 30% break even, and 30% are losing money.

11 – Inadequate inventory management – Too little inventory will hurt your sales. Too much inventory will hurt your profitability.

12 – Poor financial management – Use a professional accounting software like Freshbooks. Keep records of all financial records and always make decisions based on the information you get from real data. Know where you stand all the time. If numbers are not your thing, hire a financial professional to explain and train you to understand, at least the basics.

13 – Lack of focus – Without focus, your business will lose its competitive edge. It is impossible to have a broad strategy on a startup budget. What makes startups succeed is their ability to quickly pivot, and the lack of focus leads to the inability to make the necessary adjustments.

14 – Personal use of business funds – Your business is not your personal bank account.

15 – Overexpansion – It is easy to make the mistake of expanding your business into too many verticals. Before you enter new markets make sure you maximize your existing market.

16 – Macroeconomic factors – Entrepreneurs can’t control macroeconomic factors. Common macroeconomic factors are business cycles, recessions, wars, natural disasters, government debt, inflation, and business cycles. Your business can still succeed in bad times. Hyatt, Burger King, FedEx, Microsoft, CNN, MTV, Trader Joe’s, GE, HP are only a few examples of wildly successful companies that started during a tough economy.

17 – No succession plan – Future leaders should be identified in advance. Without an effective succession plan, your business is unprepared to fill openings created by retirements, unexpected departures, or death.

18 – Wrong partner – It’s no secret that it is easier to succeed in business with the right partners. The wrong business partner will, at the very least hurt, or, at worst, destroy your company.

THREE-PART SERIES: Part Two of “50 Reasons…” will appear in the next issue of the Southern Oregon Business Journal

This is a good list. And I believe there is also another reason why most businesses fail – lack of desire to make/grow it.

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Top 10 reasons why businesses fail

By BBC Maestro Business Last updated: 19 July 2022

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Starting your own business can be as daunting as it is exciting. Your business idea has the potential to improve the lives of millions, but the road ahead can feel uncertain. Whether it’s your first time launching a business or your tenth, it’s always good to have an awareness of the reasons why businesses fail.

Research has shown that approximately 20% of small businesses fail within the first year . By the end of the second year, 30% of businesses will have failed, and roughly half will have failed by the fifth year. If you hadn’t guessed it, the further time goes on, the higher the failure rate.

That’s not to say that your business will fail though. There are plenty of ways to minimise the risks. Read on to explore the top 10 reasons why businesses fail, and how you can avoid these pitfalls.

Why do businesses fail?

Every business owner will face a time when they are uncertain of their future. It may be a quiet period, a lack of direction, or plummeting numbers that can send business owners into a spiral. The good news is, it’s normal, and there are usually clear signs that something isn’t working. Take a look at this list of reasons why businesses fail and what you can do to prevent it from happening.

1.     Lack of leadership

One of the most important reasons why a business fails is a lack of leadership. When the most senior person in a company fails to take ownership of their role and understand their impact on the company’s culture, it can be detrimental to the success of that business.

Leaders need to provide direction, act responsibly on behalf of the business, hold themselves accountable, and show loyalty to the business and its people. Good leaders make sure their staff and investors remain happy, and that their product or service consistently delivers on quality.

A great leader will have a vision for the company that they want to achieve and will be an expert in communicating that goal from the top down. Peter Jones aptly says in his online business course “every successful person starts with a vision”. A leader without a vision may misdirect the business and its needs. Ultimately the behaviour, attitudes and beliefs of a CEO or managing director will impact the company culture – and affect your employees' motivation. So, it’s important to lead your business with confidence, focus and charisma.

2.     Improper planning

To build a successful business that stands the test of time, having a business plan that serves every need of the business is vital. An incoherent or inaccurate business plan that fails to consider all the business’ needs – from the supply chain, all the way to partnership investment – is one of the key indicators that a company may fail.

A good business plan will show the company’s objectives, strategies, goals, and forecasts. It will clearly explain what the company needs to do to achieve its business aims. It will provide an overview of the business at large and can help business leaders and investors spot potential problems that could lie ahead. The benefit of this is that the company can then plan how to tackle these issues before they come to fruition.

Constructing a good business plan will act as your pathway to achieving your vision. “If you don’t have a vision, you don’t know where you’re going,” says Peter Jones. It will keep you on track which can be particularly useful for new entrepreneurs.

3.     Ignoring customer needs

One of the biggest reasons businesses fail is because they fail to recognise the most important part of their work - the needs of their customers.

Starting a new business can be a whirlwind. As a business leader, the moment you commit to your idea is where the rush kicks in. From securing investment and getting your company name out there, to competing with others in the market and making more revenue, there will be times when you need to prioritise different parts of your business.

The one thing many fail to address in this exciting period is  the demands of their customers. Sometimes you need to chase an investment or pivot your strategy altogether.  But in these moments, it’s important to remind yourself of who the customers are that you are serving, and what they expect of you and your business. After all, they are the ones who can keep you in business. Peter Jones perfectly sums this up – “the customer is king,” he says.

4.     Company culture

People are at the heart of every business. This is something Peter Jones speaks highly of in his BBC Maestro course Toolkit For Business Success . From board members to team leads - everyone who is a part of your company has their own reasons why they are working for you. You can hope that they are working towards the same goal as you – to do the very best for your company – but to keep you all on that path together, you need to make sure everyone is being treated in a fair, supportive and encouraging manner. This is a vital part of business ethics .

If those in charge of different business areas have poor management skills – of either workload or people – this can have an impact on your business’ success. Perhaps a manager isn’t proficiently managing the team’s workflow. This can have detrimental impacts on the quality of work and employee happiness. These employees may be overworked, exhausted and lacking inspiration or motivation as each new day arrives.

The same goes for a manager who fails to protect and encourage their team, and instead looks out for their own needs first. It could be something in their actions, behaviour or morals that indicates they’re not doing what’s best for the team at large. The effect of one badly managed team can have a ripple effect onto other teams, and it can have a huge impact on the culture of the company.

To build a workforce that is inclusive, diverse, motivated and happy, take a good look at the people making decisions for the company. Whether it’s department leads or investors, you want to make sure that their aims and approaches are appropriate, respectful and fair to all.

5.     Need for change

This is a very important one. There comes a time in every business journey when a business needs to make changes. This is just part of surviving in a modern world that is ever-moving and oversaturated with the competition. Businesses that don’t adapt to the world around them can feel stale. Customers will note it, good investors will note it, and the market will prove it.

Innovation is hugely important to remain relevant and for futureproofing your business. Think back to some of those high-street brands we once knew – Blockbuster, Kodak and Blackberry. They each struggled to survive in the wake of change.

So, it’s important to remain aware of the changes that are ahead. But how do you do this? Do your research. Consume a variety of content about the industry you’re in – news articles, podcasts or market reports. Who are the biggest players in the market? What are they doing that is different? You can attend conferences or study the work of trend forecasters who may highlight how technology, culture or retail are all changing the lives of consumers, and how this can impact your business too.

Once you have a grasp on what is happening and where the future is headed, you can start preparing now.

6.      Unsustainable growth

Overexpansion is one of the biggest reasons businesses fail. In times of success, many companies choose to take a big leap – accepting more projects, recruiting more staff, and committing to more than they are used to.

Growth needs to be managed carefully, with attention to detail in all areas of the business so that new demands can be met. Expanding too early, with little consideration for the business’ true needs, can drain financial resources, and in some cases, end in financial ruin.

So in times of success, don’t jump the gun too soon. Revisit your business plan and assess areas of growth, the impact this will have on the wider company, and how long you may be able to sustain it.  

7.     Impractical partnerships

Sometimes the choices we make backfire. But that’s just one of the risks of starting a business. Mismatched partnerships can be another reason why some businesses fail.

There are many reasons why partnerships don’t always work out - from lack of communication and transparency, to unequal contribution to the mutual goal. It may be down to miscommunication or a change in vision by either partner.

For example, you may partner with another company early on in your journey when it makes sense to. Perhaps you can both gain something from the other. But inevitably, as time moves on, on and your business needs change, so might your priorities.

It may mean that this partner can no longer be of service to you and you need to cut ties. If this is an amicable end to the relationship it can be plain sailing. In some instances, this can get ugly, with expensive fines or even lawsuits being placed in front of you. These can seem unlikely when your collaboration first began together, but these can happen when you least anticipate it.

So when you’re exploring new partnership opportunities, think long and hard about how this will help your business thrive in the long run. From the moment you send your business proposal or business pitch, to the moment you sign any lawful agreements, get advice from legal partners and use your business acumen to assess if this is really the right decision.

8.     Competitor success

Competition in business is healthy. It keeps many businesses tuned in to the market and encourages them to strive to do better. But ignoring the work of your competitors can be damaging to the success of your company.

Understanding the core offering of your competitors, and what makes it different to yours, is incredibly valuable as a business owner. It allows you to differentiate yourself from the crowd and can instil confidence in you that your business is unique and serves a purpose.

It’s when a new competitor arrives in the market, with an offering that outshines yours, that problems can arise arrive. Or if a market becomes oversaturated and standing out from the crowd becomes challenging. For example, take a look at the new wave of fast-track food delivery services that cropped up post-pandemic. The once exclusive Deliveroo now competes with over a dozen other food delivery services around Europe. It’s in these instances that appealing to your customer base in new ways can help your business survive.

Having a business model that is agile, and an innovative and creative team behind you, can help you adapt to new competitors on the scene. Tackling a challenge head-on, exploring new solutions and being able to adapt, will differentiate your business from those who remain stagnant.

9.     Poor financial management

It may seem obvious, but it’s crucial to pay attention to your company’s finances. Inefficient processes, inaccurate forecasts, and a general lack of awareness of your company’s spending and income, are some of the biggest reasons why a business can fail.

Many businesses take about 2-3 years to become profitable . Business owners and financial leads need to make realistic expectations about the amount of income the company will need to bring in sufficient capital to cover all costs until the business can do it itself.

Making sure you have a strong team of financial experts can help, but a business owner should also be aware of the details. Get to grips with what your income is versus your expenses. The more comfortable you are with this, the better equipped you will be to grasp the overall picture. It can help you spot any upcoming pitfalls, assess the potentially good or bad times of year for you as a business, and therefore plan in advance.

10.     Unforeseen events

Across the world, businesses are still grappling with the repercussions of Covid 19. It was the event that put a stop to business, government agendas, and life at large. For many businesses during the emergence of covid, cash flow dramatically decreased. In its wake, many business owners are still feeling the impact it has had and are now aware of the need to be prepared for unforeseen global events.

It’s not just pandemics that pose a threat. But economic crashes, breakouts of war, or climate-related disasters, are all possible situations that the world may find itself facing in the future.

Although preparing for these seems impossible, some ways to futureproof your business may be to develop emergency plans or set up new payment schemes that give consumers the option to pay in instalments for your services. You can also study the strategies many of today’s businesses adopted throughout Covid 19 and see how effective they were.

So when it comes to launching your own business, keep this list close to hand. Running a business will be hard work at times, so having an overview of potential pitfalls may just keep you on track. If you’re looking to start your own business, you can take a look at Peter Jones’ BBC Maestro course to help kickstart your journey as an entrepreneur. 

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50 Reasons Why Some Businesses Fail While Others Succeed

Why is it that so many businesses fail while so few succeed.

One of the great mysteries of entrepreneurship is why businesses fail . Some people start one successful business after another while others fail to succeed.

Why some businesses fail while others succeed?

No one starts a business expecting to fail. Starting a business can be a lot of fun and excitement. Success requires a lot of planning and starting the business the right way. Entrepreneurship is easier if you start your business the right way.

The worst part about a failing business is that the entrepreneur is unaware of it happening until it is often too late. It makes sense because if the entrepreneur really knew what he was doing wrong, he might have been able to save the business. Some entrepreneurs live in a land of denial while others are unaware of their mistakes.

One thing for sure, a business almost always fails because of the entrepreneur.

“ It’s not the plan that is important, it’s the planning. ” Dr. Graeme Edwards

There are over 28 million small businesses in the United States, according to the SBA .

It’s an impressive number. The sad reality is that only about 50% of them survive. What’s worse is that only about one-third survive 10 years or more. The life of an entrepreneur is unforgiving. It is a constant challenge. There are many moving parts. Any one of them could put you out of business.

Factors That Lead to Business Failure

Businesses fail for many reasons. The following list includes some of the most common reasons:

1 – Lack of planning  – Businesses fail because of the lack of short-term and long-term planning. Your plan should include where your business will be in the next few months to the next few years. Include measurable goals and results. The  right plan will include specific to-do lists  with dates and deadlines. Failure to plan will damage your business.

2 – Leadership failure – Businesses fail because of poor leadership. The leadership must be able to make the right decisions most of the time. From financial management to employee management, leadership failures will trickle down to every aspect of your business. The most successful entrepreneurs learn, study, and reach out to mentors to improve their leadership skills.

3 – No differentiation – It is not enough to have a great product. You also have to develop a unique value proposition, without you will get lost among the competition. What sets your business apart from the competition? What makes your business unique? It is important that you understand what your competitors do better than you. If fail to differentiate, you will fail to build a brand.

Why do small businesses fail? Statistically, small businesses that are most likely to fail are local trucking, plumbing and HVAC service providers, grocery stores, and security brokers.

4 – Ignoring customer needs – Every business will tell you that the customer is #1, but only a small percentage acts that way. Businesses that fail lose touch with their customers. Keep an eye on the trending values of your customers. Find out if they still love your products. Do they want new features? What are they saying? Are you listening? I once talked to the CEO of a training company who told me that they don’t respond to negative reviews because they are unimportant. What? Are you kidding me?

5 – Inability to  learn from failure  – We all know that failure is usually bad, yet it is rare that businesses learn from failure. Realistically, businesses that fail, fail for multiple reasons. Often entrepreneurs are oblivious about their mistakes. Learning from failures is difficult.

6 – Poor management – Examples of poor management are an inability to listen, micro-managing – AKA lack of trust, working without standard or systems, poor communication, and lack of feedback.

7 – Lack of capital – It can lead to the inability to attract investors. Lack of capital is an alarming sign. It shows that a business might not be able to pay its bills, loan, and other financial commitments. Lack of capital makes it difficult to grow the business and it may jeopardize day-to-day operations.

8 – Premature scaling – Scaling is a good thing if it is done at the right time.  To put it simply, if you scale your business prematurely, you will destroy it. For example, you could be hiring too many people too quickly, or spend too much on marketing. Don’t scale your business unless you are ready.  Pets .com failed because it tried to grow too fast. They opened nationwide warehouses too soon, and it broke them. Even the great brand equity that they have built couldn’t save them. Within a few months, their stock went from $11 to $0.19.

According to a study of about 3200 high growth internet startups done by  Startup Genome , about 70% of the startups in their dataset scaled prematurely.

9 – Poor location – Poor location is a disadvantage that might be too much to overcome. If your business relies on foot traffic, location is a strategic necessity. A poor location might make your customer acquisition costs too high.[/fusion_text]

10 – Lack of profit – Revenue is not the same as profit. As an entrepreneur, you must keep your eyes on profitability at all times. Profit allows for growth. According to Small Business Trends, only 40% of small businesses are profitable, 30% break even, and 30% are losing money.

11 – Inadequate inventory management – Too little inventory will hurt your sales. Too much inventory will hurt your profitability.

12 – Poor financial management – Use a professional accounting software like Freshbooks. Keep records of all financial records and always make decisions based on the information you get from real data. Know where you stand all the time. If numbers are not your thing, hire a financial professional to explain and train you to understand, at least the basics.

13 – Lack of focus – Without  focus, your business  will lose it the competitive edge. It is impossible to have a broad strategy on a startup budget. What makes startups succeed is their ability to quickly pivot, and the lack of focus leads to the inability to make the necessary adjustments.

14 – Personal use of business funds – Your business is not your personal bank account.

15 – Overexpansion – It is easy to make the mistake of expanding your business into too many verticals. Before you enter new markets make sure you maximize your existing market.

16 – Macroeconomic factors – Entrepreneurs can’t control macroeconomic factors. Common macroeconomic factors are business cycles, recessions, wars, natural disasters, government debt, inflation, and business cycles. Your business can still succeed in bad times. Hyatt, Burger King, FedEx, Microsoft, CNN, MTV, Trader Joe’s, GE, HP are only a few examples of wildly successful companies started during a tough economy.

Sometimes businesses fail due to a once in a lifetime economic turmoil caused by an unforeseen external challenge. The COVID-19 pandemic has forced many businesses to fail. Unfortunately, the destructive impact of the COVID-19 crisis is especially damaging to small businesses.

17 – No succession plan – Future leaders should be identified in advance. Without an effective business succession plan , your business is unprepared to fill openings in created by retirements, unexpected departures, or death.

18 – Wrong partner – It’s no secret that it is easier to succeed in business with the right partners. The wrong business partner will, at the very least hurt, or, at worst, destroy your company.

If you are serious about making it as entrepreneurs, focus on the following:

19 – Make a plan – It all begins with planning. The biggest mistake many entrepreneurs make as they start their ventures is that they don’t sit down and write a business plan. The goal is to keep it concise. Don’t treat it like a business school project. Leave writing a 50,000-word business plan to academics. Let them waste their time. You can do a great business plan in one or two pages. There are some great books on business plans such as “The Secrets to Writing a Successful Business Plan” and “Successful Business Plan“.

Your business plan should include the following:

20 – Core values – Your core values are the  fundamental beliefs that drive your business . They are your guiding principles that should remain constant. Even as your company grows your core values should remain the same. Core values can also serve as a moral compass. Some of the more common core values are integrity, trust, excellence, respect, responsibility, and teamwork.

Don’t allow your core values to become empty words, make them part of your culture.

21 – Mission statement – A brief statement that defines  why your company exists . Your corporate reason for being. It describes your target market and the services/products you offer. If you have done it right, your mission statement, in just a few sentences, will communicate the essence of your business to your business and to the world.

22 – Who are your customers – If you are  going to succeed in business  you will have a clear definition of your customer. It is not an abstract idea. It is something that can be expressed in numbers. For example, if your target customers are family law attorneys, you have to be able to put a number on it. For example, there are 175,000 (fictional number) family law attorneys in the USA and they are our customers.

23 – What is your product/service – It’s key to have a clear definition of the services you offer. Without a clear definition, you will be unable to effectively develop, market, and sell your services.

24 – Involve your customers in product development –  Most businesses that fail create products/services without involving their customers. If you are serious about success, you will build your products with your customers. Businesses that fail build products based on assumptions.

25 – How will you sell and market your product/service – Marketing and selling your service could be one of your  biggest business challenges . A sales and marketing plan is a must.  Set measurable goals . Create systems to manage the process.

Proper preparation doesn’t require a 100-page formal business plan. The keyword is “proper,” not “planning.” If you do everything in your power to properly plan your business, you increase your chances for success. Don’t confuse planning with avoiding action or paralysis analysis. No amount of planning is a substitute for action.

“No matter what one does, regardless of failure or success, the experience is a form of success in itself.” Jack Ma, billionaire founder of Alibaba

Your first action item is to write your business plan. Completing your business plan will give you an opportunity to process your idea in detail. One of the best things you can do is to collect your thoughts before you make a real commitment to starting your business. If you aren’t passionate about writing your business plan, it’s unlikely that you’ll get passionate about your business either.

One day you might think of a product that could revolutionize life on earth as we know it. You might dream up something so great that no one ever thought of before. The reality is that most  successful businesses  are without revolutionary ideas. Instead, they modify or improve well-established products or services.

Must Have Business Plan Components

• Mission Statement
• Company Description
• Product Description
• Market Analysis
• Marketing Strategy
• Revenue Projections

If you don’t prepare a business plan, your initial enthusiasm will fade and you will fail.

26 – In the end, enthusiasm is not enough to succeed. It takes much more than that. You need to research your market, your competition, the financial feasibility of your concept, and more. As you fight through the battles of making your dream come true, you need to be able to go back to read and re-read your business plan. The concepts laid down in your business plan will help you to convince your bank to give you the loan you need, or to determine the best marketing strategy for your business. Don’t be emotional when you prepare your business plan. Treat it as a business process with goals and deliverables. Once you complete it, ask yourself, “Would I invest in this company?” Remember, you are going to have to convince others to support your idea. Bankers, corporate buyers, investors, partners, and the like will look at your business based on facts. Their decision is not going to be based on emotion. When creating a written business plan you give yourself a chance to think about your idea thoroughly. As you put your ideas in writing, you tend to give them more thought. You might think writing a business plan is boring, or a waste of time. Truly, it should be one of the most exciting projects you could ask for. You are writing your future.

27 – You are accountable –  Many businesses fail because people treat them like hobbies. From day one treat your business as a business. Treat yourself as an employee. Set measurable goals and hold yourself accountable. If you only plan to work in your business a couple of hours a week, you can’t expect great results. Owning your own business requires focus and commitment. Educate yourself about the wide range of options and technologies. You can’t expect to get an ounce more out of your business than what you’ve put into it. If you are only willing to put in a few hours a week, expect to get a few hours a week of income. There are no shortcuts.

Entrepreneurs can stay accountable several ways:

28 – Write down your goals. Keep your goals in front of you and keep coming back to them, at least once a month.

29 – Build an advisory board.

30 – Join a peer advisory group. You will get feedback from fellow entrepreneurs. The best kind of peer advisory group is where your business is the smallest business. You definitely don’t want to be the largest or most successful business of your group. When you are the smallest you will be pushed harder to catch up to the others in your group.

31 – Find a coach. Try to work with a coach who has already built a successful business.

32 – Find an investor, an angel or venture capitalist .

33 – Forget the idea, take action –  You should never start a business based on a great idea. An idea is just that: an idea. It’s worthless. It is not going to help you succeed in business. Ideas won’t do; you need action to succeed. Wantrepreneurs are full of ideas that never result in action. Entrepreneurs are action takers.

Here are some effective ways to turn your idea into action:

34 – Believe that you can do it. I don’t mean fooling yourself into anything, but the only way can you make it happen if you believe that it will happen.

35 – Reach out to mentors. There are many successful people within your own existing network, and you can also make new connections. Connecting with mentors helps you hear what it takes to be an entrepreneur.

36 – Minimize risk, but understand that it is unavoidable.

37 – Give it due time. Ideas are fast, but making them happen will take time. Even if all goes well, almost everything you do in business will take longer than expected.

38 – Get others to believe in you. Successful entrepreneurs are great at selling their visions. You might have to convince vendors, partners, landlords, investors, employees, or a list of more people.

39 – Prepare to fail – Do not fear failure. There is one thing for sure, you will fail before you succeed. Expect failure but don’t fear it. Think of it as a normal part of your business. It is necessary. It is good for your business. It teaches you. It helps you make the right decision the next time. It is super important that you don’t associate failure with quitting. Only those that take action fail and only those that take action succeed.

40 – Pivot, rinse and repeat – Successful entrepreneurs are always adjusting. There are many reasons to adjust. Your customers might ask for a new software feature. Or, the recession might have put your best customers out of business. The price of raw materials might rise one day. Your business and its environment are dynamic. If you are good, you develop a keen eye for changes and make quick adjustments. Most businesses that fail do so because they ignore the world changing around them.

41 – Focus on your customer – You customer keeps you in business and puts you out of business too. If you listen to them, you can improve your products or services. If you ignore they fire you. Customers don’t disappear, they go to your competitors. Reach out to your customers. Ask them questions. Ask what they like or dislike. Welcome negative feedback. Don’t be defensive about it. Negative feedback gives you a chance to improve.

42 – Stay profitable – Staying profitable will solve many problems. The lack of profit could put you out of business even if you have record sales. Forget sales. Forget your revenue. Forget the total number of customers. Always be mindful of profitability.

43 – Manage cash – Entrepreneurs that fail often confuse cash flow with profit. The two are not synonymous. It is possible for you to go bankrupt with record cash flowing into your business. To succeed in business you don’t just need cash flow, you need positive cash flow. With positive cash flow happens when the cash funneling into your business is more than the amount of cash leaving your business. It is simple yet often ignored. The companies that ignore this end up with negative cash flow. This happens when the outflow of cash is more than your incoming cash. You should never allow negative cash flow.

Here are 10 of the most profitable companies in the world:

• Exxon Mobil
• Wells Fargo
• J.P. Morgan Chase
• Berkshire Hathaway
• Johnson & Johnson
• General Electric (GE)

Here are a few ways to improve your cash flow:

44 – Get paid in advance, ask for deposits or full payment in advance.

45 – Be very selective in offering credit to customers, avoid it if possible.

46 – Increase your sales.

47 – Offer incentives for early payment.

48 – Secure loans for emergencies.

49 – Disasters do happen – Even though Warren Buffet has a hands-off approach to managing his portfolio of companies. He does require the CEOs of each of his companies to have a one sheet in case of an emergency. The sheet of paper contains information on key aspects of the company. While the one sheet of paper might be overly simplified the point is that you have to be prepared for the worst.

50 – If you will succeed in business, you must figure out how to deal with the unexpected. It’s not that “what if it happens“, but “when it happens“. What if your best salesperson quits tomorrow? How long before you will replace her? Do you have a system in place, so when you hire a replacement she can sell?

Systems are crucial to recovering from a disaster. Formal procedures are key. Identify the key parts of your business and think about what it would take to recover losing any of them. For example, if your company relies on your e-commerce website, develop a system to recover your site even if your current site crashes and  your hosting company  goes out of business within the same day. You don’t have to be paranoid about it, but create systems of key parts of your company.

Unsuccessful Business Strategies

If you want to succeed in business, you need to learn from unsuccessful business strategies. An unsuccessful business strategy involves a business model which lacks profit. Driving profit is a must for any successful business.

After all, the core purpose of a business os to make a profit. But profit itself isn’t enough to succeed. Companies should focus on constant innovation with a relentless focus on exceptional customer service.

A profit-first approach can be a short-term win but a long-term loss. If you want to succeed in business, you must drive innovation in your industry. Profit is only a by-product of exceptional service.

Exploring additional revenue streams will help companies become more profitable.

In Conclusion

Few places are less forgiving than the business world. Eventually, everything adds up. If your customers prefer your competitors, your employees would rather work for someone else, your partners no longer believe in each other or the business, and the many mistakes you can make along the way. And that is why businesses fail.

Yes, it is true that most businesses fail. It is also true that many of them succeed. Those that succeed are not the result of miracles. Entrepreneurs who lead businesses to success understand that it takes a carefully planned and executed strategy. A little luck also helps.

Why do most businesses fail?

Ineffective business planning is a top reason for business failure. Business planning requires time and effort, that many entrepreneurs are unwilling to invest.

Without a business plan, a business is more likely to fail.

Most businesses fail because they either run out of money, have bad management, or rely on a poorly executed marketing strategy.

The biggest reason most businesses fail is a lack of funding. Without working capital, no business can continue to operate. Payroll, funding day-to-day business expenses, is a recipe for business failure.

Many businesses fail before they have a chance to take off because they lack a successful go-to-market strategy.

Inadequate management is another common reason for business failure. To keep a business going and growing requires a wide range of skills. While the business founders may have the required skills for some aspects of the business, they may not have all of the necessary skills.

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29 comments.

Nice post. Understanding your customer is a crucial point.

What do you do in your business to understand your customer?

Great article! Covered a lot of perspectives. Most owners believe that “knowledge is power” however they should understand that only “applied knowledge” is only the power that works! -great point. Keep up the good work. I love Success Harbor.

Hi Georgia, Thank you for your comment. I hope you keep coming back to read our posts. Let me know if I can help you. George Meszaros Success Harbor

Nice article covered most of everything that is required to build a successful business. I can tell you put a lot of time and effort into this article.

Thank you, Selvam, for the kind words. Come back soon to read more of our content.

All of these are great reasons why small businesses fail. From my point of view it all comes down to this: All successful businesses have a clear marketing strategy that makes everything they do more effective.

Good point, Patrick. Thank you for taking the time to comment. I hope to see you back on Success Harbor soon 🙂

Thank you GEORGE for this tremendous effort to help those who have the business mind, especially people like me who are business students, I really benefit a lot. thank you once more.

Thank you for taking the time to comment. I am glad that you find it beneficial. How much more time do you have left before you receive your business degree?

Hi, I have only one year left Sir.

Thanks George .. please keep updated about reasons of failure in similar pattern. It helps alot.

Great article!

But, I think it is important to differentiate different kinds of businesses, especially venture capital startups versus plain old small businesses. The failure rate for VC startups is much higher than for other small businesses.

Surprisingly, this is by design!

I don’t mean that the VC’s want you to fail at all, they don’t. But what they want even less is for their VC fund to fail. In order for a large VC fund to succeed, they need to make sure they get a couple of GIANT successes. These are billion dollar companies they call “Unicorns”.

A small success just isn’t helpful. I’ve done 7 VC Startups now–I founded 3 and participated in 3 others. My success ratio is actually very decent. 2 of the 3 companies I founded were successful and 1 of the 4 others IPO’d. That’s much higher than the VC success ratio.

It may surprise you to learn that the VC’s would consider all 3 successes to be failures–even the IPO! None of them produced billion dollar results for them even though they all produced 7- to 8-figure results for me. On the very biggest deal, the VC’s initially told us to walk away from a $10 million dollar payday after just 10 months of work because it didn’t make them enough money.

My conclusion after working that world for years is that if you want to succeed, and you don’t need to be a billionaire to call it success, avoid VC’s. Start your own business.

Thank you for sharing your business experience, Bob. Perhaps, one day we could do an interview about your business experience.

George, sure, would love to do an interview! You can track me down any time on my entrepreneurship blog, BobWarfield.com.

Sounds good, Bob.

Thanks for another great article. I especially enjoyed your point “One thing for sure, a business almost always fails because of the entrepreneur.” Which made me smile and frown. Knowing that it applied directly to this entrepreneur. I had discovered through my business consulting that the most successful startups are those by owners willing to look at their strengths and weaknesses, and not hide

Hi Marsha: Thank you for taking the time to comment. Please come back soon.

Hi Vikash, You wrote “almost” all major issues. Can you think of any major issues that are not in the article? I might include them.

I can’t think of any other place where you could find such a comprehensive and realistic article as this one. It covers all the bases in simple to understand language. Yet all around us we know that some organisations are unable to take advantage of the wisdom here. This is basic stuff – 101 primer, but it comes in the type of “simple, but not easy”. Utterly brilliant.

Thank you, Roger. Do you own a business or thinking about starting a business?

It’s my pleasure, George. I’ve started several, bizarrely with an unusually low failure rate, mainly in the supply of software services to investment banks. I sold out some years ago, took some time to look after my son, and then fell into “Obliquity”, a term coined by Sir John Black of ICI, when he first discovered that the best way of achieving an objective was not always the obvious way. It’s worked well for me, and I’m considering if it’s possible to teach others quickly and effectively as a change of direction, rather than doing it myself. What I find frustrating is the number of people who could do well, not taking the small steps that would transform their lives.

We live in a world that craves attention. If you give your attention to a person, or to a meeting, to a seminar etc. just one person can influence the outcome to get the best result for everyone – but particularly themselves. And yet nobody does this. I’ve found it particularly useful in a commodity – like market where clients will dump you for a cheaper competitor in a heartbeat. It took me years to realise that if you sold a commodity, there was no USP other than yourself and a cunning plan. The wasted time spent trying to differentiate our offering from the rest was ridiculous. Besides, if by some miracle you came up with something, the entire market could copy it.

Sorry, George, I wasn’t intending to write this much – it’s just on my mind at the moment. Take care!

I appreciate the detail in your response.

Thank you, George Meszaros, for writing this article! It contained a lot of information that made sense to me, in like normal person writing. I want to start a business after I get into high school, yeah I know, the chances of success are about 20%, if I had to guess, but I am putting in the work now. But thanks for writing this article it’s very helpful.

Thank you for the kind words, Justin. Good luck in high school.

Did you have it easy when you started up as an entrepreneur?

I don’t think anyone had it easy when started a business. Starting a business is hard.

Thank you very much for this article. I think this is the best article ever on why businesses fail. Thank you, and keep it up.

Thank you for the kind words, Dmitriy 😉

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Israel’s Deadly Airstrike on the World Central Kitchen

The story behind the pioneering aid group and how it mistakenly came under attack..

From “The New York Times,” I’m Michael Barbaro. This is “The Daily.”

The Israeli airstrike that killed seven aid workers delivering food in Gaza has touched off outrage and condemnations from across the world. Today, Kim Severson on the pioneering relief crew at the center of the story, and Adam Rasgon on what we’re learning about the deadly attack on the group’s workers. It’s Thursday, April 4.

Kim, can you tell us about the World Central Kitchen?

World Central Kitchen started as a little idea in Chef José Andrés’ head. He was in Haiti with some other folks, trying to do earthquake relief in 2010. And his idea at that point was to teach Haitians to cook and to use solar stoves and ways for people to feed themselves, because the infrastructure was gone.

And he was cooking with some Haitians in one of the camps, and they were showing him how to cook beans the Haitian way. You sort of smash them and make them a little creamy. And it occurred to him that there was something so comforting for those folks to eat food that was from their culture that tasted good to them. You know, if you’re having a really hard time, what makes you feel good is comfort food, right? And warm comfort food.

So that moment in the camp really was the seed of this idea. It planted this notion in José Andrés’ mind, and that notion eventually became World Central Kitchen.

And for those who don’t know, Kim, who exactly is Chef José Andrés?

José Andrés is a Spanish chef who cooked under some of the Spanish molecular gastronomy greats, came to America, really made his bones in Washington, DC, with some avant-garde food, but also started to expand and cook tapas, cook Mexican food. He’s got about 40 restaurants now.

Yeah. And he’s got a great Spanish restaurant in New York. He’s got restaurants in DC, restaurants in Miami.

Come with me to the kitchen. Don’t be shy.

He’s also become a big TV personality.

Chef, are you going to put the lobster in the pot with the potatoes?

We’re going to leave the potatoes in.

Leave the potatoes in!

He’s one of the most charismatic people I’ve ever been around in the food world.

He’s very much the touchstone of what people want their celebrity chefs to be.

So how does he go from being all those things you just described, to being on the ground, making local comfort food for Haitians? And how does this all go from an idea that that would be a good idea, to this much bigger, full-fledged humanitarian organization?

So he started to realize that giving people food in disaster zones was a thing that was really powerful. He helped feed people after Hurricane Sandy, and he realized that he could get local chefs who all wanted to help and somehow harness that power. But the idea really became set when he went to Houston in 2017 to help after Hurricane Harvey.

And that’s when he saw that getting local chefs to tap into their resources, borrowing kitchens, using ingredients that chefs might have had on hand or are spoiling in the fridge because the power is out and all these restaurants needed something to do with all this food before it rotted — harnessing all that and putting it together and giving people well-cooked, delicious — at least as delicious as it can be in a disaster zone — that’s when World Central Kitchen as we know it today sort of emerged as a fully formed concept.

The first pictures now coming in from Puerto Rico after taking a direct hit — Hurricane Maria slamming into the island. And as you heard, one official saying the island is destroyed.

Shortly after that, he flew to Puerto Rico, where Hurricane Maria had pretty much left the entire island without water and in darkness.

He flew in on one of the first commercial jets that went back in. He got a couple of his chef buddies whose kitchens were closed, and they just decided to start cooking. They were basically just serving pots of stew, chicken stew, in front of the restaurants.

The lines got longer. And of course, chefs are a really specific kind of creature. They really like to help their community. They’re really about feeding people.

So all the people who were chefs or cooks on the ground in Puerto Rico who could wanted to help. And you had all these chefs in the States who wanted to fly down and help if they could, too. So you had this constant flow of chefs coming in and out. That’s when I went down and followed him around for about a week.

And what did you see?

Well, one of the most striking things was his ability to get food to remote places in ways the Salvation Army couldn’t and other government agencies that were on the ground couldn’t. You know, the Federal Emergency Management Agency, FEMA, doesn’t deliver food. It contracts with people to deliver food.

So you have all these steps of bureaucracy you have to go through to get those contracts. And then, FEMA says you have to have a bottle of water and this and that in those boxes. There’s a lot of structure to be able to meet the rules and regulations of FEMA.

So José doesn’t really care about rules and regulations very much. So he just got his troops together and figured out where people needed food. He had this big paper map he’d carry around and lay out. And he had a Sharpie, and he’d circle villages where he’d heard people needed food or where a bridge was out.

And then he would dispatch people to get the food there. Now, how are you going to do that? He was staying in a hotel where some National Guard and military police were staying to go patrol areas to make sure they were safe. He would tuck his big aluminum pans of food into the back of those guys’ cars, and say, Could you stop and drop these off at this church?

During that time in Puerto Rico, he funded a lot of it off of his own credit cards or with cash. And then he’s on the phone with people like the president of Goya or his golf buddies who are well-connected, saying, hey, we need some money. Can you send some money for this? Can you send some money for that?

So he just developed this network, almost overnight. I mean, he is very much a general in the field. He wears this Orvis fishing vest, has cigars in one pocket, money in the other. And he just sets out to feed people.

And there were deliveries that were as simple as he and a couple of folks taking plastic bags with food and wading through a flooded parking lot to an apartment building where an older person had been stuck for a few days and couldn’t get out, to driving up to a community that had been cut off. There was a church that was trying to distribute food.

We drive through this little mountain road and get to this church. We start unloading the food, and the congregation is inside the church. José comes in, and the pastor thanks him so much. And the 20 people or so who are there gather around José, and they begin praying.

And he puts his head down. He’s a Catholic. He’s a man who prays. He puts his head down. He’s in the middle of these folks, and he starts to pray with them. And then, pulls out his map, circles another spot, and the group is off to the next place.

And when Russia invades Ukraine, he immediately decided it was time for World Central Kitchen to step into a war zone. You know, so many people needed to eat. So many Ukrainians were crossing the border into Poland.

There are refugees in several countries surrounding Ukraine. So a lot of the work that they did was feeding the refugees. They set up big operations around train stations, places where refugees were coming, and then they were able to get into cities.

One of their operations did get hit with some armaments early on. Nobody was hurt badly. But I think that was the first time that they realized this was an actually more dangerous situation than perhaps going in after there’s been an earthquake.

But the other thing that really made a difference here is, José Andrés and World Central Kitchen would broadcast on social media, live from the kitchens. In the beginning, he’d be holding up his phone and saying, we put out 3 million meals for the people of Puerto Rico, chefs for Puerto Rico. It was very infectious.

And now, one of the standard operating procedures for people who are in the World Central Kitchens is to hold up the phone like that — you can see the kitchen, busy in the back — and talk about how many meals they’ve served. They have these kind of wild meal counts, which one presumes are pretty accurate. But they’re like, we served 320,000 meals this morning to the people of Lviv.

I mean, that scale seems important to note. This is not the kind of work that feeds a few people and a few towns. When you’re talking about 300,000 meals in a morning, you’re talking about something that begins, it would seem, to rival the scope and the reach of the groups that we tend to think of as the most important in the disaster-relief world.

Absolutely. And the meals — there are lots and lots and lots of meals. But also, World Central Kitchen hires local cooks. They’ll hire food truck operators, who obviously have no work, and pay them to go out and deliver the meals. They’ll pay local cooks to come in and cook. That’s what they do with a lot of their donations, which is very different than other aid organizations. And this then helps the local economy. He’s trying to buy as much local food as he can. That keeps the economy going in the time of a disaster. So that’s a piece of his operation that is a little different than traditional aid operations.

So walk us up to October 7, when Hamas attacked Israel. What does Chef José Andrés and the World Kitchen do?

Well, he had had such impact in Ukraine. And I think the organization itself thought that they had the infrastructure to now take food into another war zone. Gaza, of course, was nothing like Ukraine. But World Central Kitchen shows up. They’re nimble. They start to connect with local chefs.

Right now, they have about 60 kitchens in the areas around Gaza, and they’ve hired about 400 Palestinians to help do that. But getting the food into Gaza became the difficulty.

How do you actually get the food into the Gaza Strip? Large amounts of food that require trucks? You’ve got to realize, getting food into Gaza right now requires going through Israeli checkpoints.

And that slows the operation down. You might get eight trucks a day in, and that is such a small amount of food. And this has been incredibly difficult for any aid operations.

So World Central Kitchen, playing on the experience that they had in a war zone and working with government entities and trying to coordinate permissions — they took that experience from Ukraine and were trying to apply it in the Gaza Strip. Now, they had worked for a long time with Israeli officials. They wanted to make sure that they could get their food in.

And they decided that the best way to do it would be to take food off of ships, get it in a warehouse, and then get that food into Gaza. It took a long time to pull those permissions through, but they were able to get the permissions they needed and set this system up, so they could move the food fairly quickly into North Gaza.

And once they get those permissions, how big a player do they become in Gaza?

World Central Kitchen became a kind of a fulcrum point for getting food aid in to Gaza in a way that a larger and more established humanitarian aid operations couldn’t, in part because they were small and nimble in their way. So the amount of food they were moving maybe wasn’t as large as some of the more established humanitarian aid organizations, but they had so much goodwill. They had so much logistical knowledge.

They were working with local Palestinians who knew the food systems and who understood how to get things in and out. So they were able to find a way to use a humanitarian corridor to have permissions from the Israeli government, to be able to move this food back and forth. And that’s always been the secret to World Central Kitchen — is incredibly nimble. So —

Just like in Puerto Rico, they seemed to win over just about everybody and do the seemingly impossible.

Right. And World Central Kitchen says they delivered 43 million meals to Gazans since the start of the war. And I don’t think there was any other group that could have pulled this off.

Hey, this is Zomi and Chef Olivier. We’re at the Deir al-Balah kitchen. And we’ve got the mise en place. Tell us a little bit about it, Chef.

And then, this caravan, this fairly efficient caravan of armored vehicles, labeled with World Central Kitchen logo on the roof, on the sides — the idea was they head on — this humanitarian quarter, they head on this road. The seven people who went all in vests — three of whom are security people from Great Britain — you have another World Central Kitchen employee who has handled operations in Asia, in Central America. She’s quite a veteran of the World Central Kitchen operation.

And you have a young man who someone told me was like the Michael Jordan of humanitarian aid, who hooked up with World Central Kitchen in Poland. He was a hospitality student and had just become an indispensable make-it-happen guy. And you have a Palestinian guy who’s 25, a driver.

So this is the team. They have all the clearances. They have the well-marked vehicles. It seemed like a very simple, surgical kind of operation. And of course, now, as we know, it was anything but that.

After the break, my colleague Adam Rasgon on what happened to the World Central Kitchen workers in that caravan. We’ll be right back.

So Adam, what ends up happening to this convoy that our colleague Kim Severson just described from World Central Kitchen?

So what we know is that members of the World Central Kitchen had been at a warehouse in Deir al-Balah in the Central Gaza Strip. They had just unloaded about 100 tons of food aid that had been brought via a maritime route to the coast of the Gaza Strip. When they departed the warehouse, they were in three cars.

Two of the cars were armored cars, and one was a soft-skinned car, according to the organization. When the cars reached the coastal road, known as Al Rashid Street, they started to make their way south.

And what do we know about how much the World Central Kitchen would have told the Israeli military about their plans to be on this road?

Yeah. So the World Central Kitchen said that its movements were coordinated. And in military speak or in technical speak, people often refer to this as deconfliction. So basically, this process is something that not only the World Central Kitchen but the UN, telecommunications companies going out to repair damaged telecommunications infrastructure, others would use, where they basically provide the Israeli military with information about the people who are traveling — their ID numbers, their names, the license plate numbers of the cars they’ll be traveling in.

They’ll sort of explain where their destination is. And the general process is that the Israelis will then come back to them and say, you’re approved to travel from this time, and you can take this specific route.

And do we know if that happened? If the IDF said, you’re approved, use this route on this night?

So we heard from the World Central Kitchen that they did receive this approval. And the military hasn’t come out and said that it wasn’t approved. So I think it’s fair to assume that their movements were coordinated and de-conflicted.

OK. So what happens as this seemingly pre-approved and coordinated convoy trip is making this leg of the journey?

They started to make their way south towards Rafah. And the three cars suddenly came under fire. The Israeli army unleashes powerful and devastating strikes on the three cars in the convoy, most likely from a drone. The strikes rip through the cars, killing everyone inside.

Shortly thereafter, ambulances from the Palestine Red Crescent are dispatched to the location. They retrieve the dead bodies.

They bring those bodies to a hospital. And at the hospital, the bodies are laid out, and journalists start to report to the world that indeed, five members of the World Central Kitchen staff have been killed. And the Palestine Red Crescent teams were continuing to search for other bodies and eventually brought back two more bodies to the hospital for a total of seven people killed in these airstrikes.

And when the sun comes up, what does it end up looking like — the scene of these struck trucks from this convoy?

So early in the morning when the sun comes up, a number of Palestinian journalists headed out to the coastal road and started taking pictures and videos. And I received a series of videos from one of the reporters that I was in touch with, essentially showing three cars, all heavily damaged. One had a World Central Kitchen logo on top of it, with a gaping hole in the middle of the roof.

A second car was completely charred. You could barely recognize the structure of the car. The inside of it had been completely charred, and the front smashed.

And do we know if the strike on this convoy was the only strike happening in this area? In other words, is it possible that this convoy was caught in some kind of a crossfire or in the middle of a firefight, or does it appear that this was quite narrow, and was the Israeli army targeting these specific vehicles, whether or not they realized who was in it?

We don’t have any other indication that there was another strike on that road around that time.

What that suggests, of course, is that this convoy was targeted. Now, whether Israeli officials knew who was in it, whether they were aid workers, seems like a yet-unresolved question. But it does feel very clear that the trucks in this convoy were deliberately struck.

Yes. I do think the trucks in this convoy were deliberately struck.

What is the reaction to these airstrikes on this convoy and to the death of these aid workers?

Well, one of the first reactions is from the World Central kitchen’s founder, José Andrés.

Chef José Andrés, who founded World Central Kitchen, calling them angels.

He said he was heartbroken and grieving.

And adding the Israeli government needs to stop this indiscriminate killing.

And then, he accused Israel of using food as a weapon.

What I know is that we were targeted deliberately, nonstop, until everybody was dead in this convoy.

And he just seemed devastated and quite angry.

And so what is the reaction from not just World Central Kitchen, but from the rest of the world to this airstrike?

There’s, frankly, fury and outrage.

The White House says it is outraged by an Israeli airstrike that killed seven aid workers in Gaza, including one American.

President Biden, who has been becoming increasingly critical of Israel’s approach to this war — he came out and said that he was outraged and heartbroken.

Certainly sharper in tone than we have heard in the past. He says Israel has not done enough to protect aid workers trying to deliver desperately needed help to civilians. Incidents like yesterday’s simply should not happen. Israel also has not —

And we’re seeing similar outrage from foreign governments. The British Foreign Secretary David Cameron —

The dreadful events of the last two days are a moment when we should mourn the loss of these brave humanitarian workers.

— said that the airstrikes were completely unacceptable. And he called on Israel to explain how this happened and to make changes to ensure that aid workers could be safe.

So amid all this, what does Israel have to say about the attack — about how it happened, about why it happened?

The response from Israel this time was much different, compared to other controversial airstrikes on the Gaza Strip. Often, when we’re reporting on these issues, we’ll hear from the army that they’re investigating a given incident. It will take days, if not weeks, to receive updates on where that investigation stands.

There are instances where Israel does take responsibility for harming civilians, but it’s often rare. This time, the Prime Minister —

[NON-ENGLISH SPEECH]

— Benjamin Netanyahu comes out with a video message —

— saying that Israel had unintentionally harmed innocent civilians. And that was the first indication or public indication that Israel was going to take responsibility for what had happened.

The IDF works together closely with the World Central Kitchen and greatly appreciates the important work that they do.

We later heard from the military’s chief of staff. Herzi Halevi issued a video statement in English.

I want to be very clear the strike was not carried out with the intention of harming aid workers. It was a mistake that followed a misidentification.

And he said this mistake had come after a misidentification. He said it was in the middle of a war, in a very complex condition. But —

This incident was a grave mistake. We are sorry for the unintentional harm to the members of WCK.

He was clear that this shouldn’t have happened.

I want to talk about that statement, because it seems to suggest — that word, “misidentification”— that the Israeli army believed that somebody else was in this convoy, that it wasn’t a bunch of aid workers.

That’s possible, although it’s extremely vague and cryptic language that genuinely is difficult to understand. And it’s a question that us in the Jerusalem Bureau have been asking ourselves.

I’m curious if the Israeli government has said anything in all of its statements so far about whether it noticed these markings on these three cars in the convoy. Because that, I think, for so many people, stands out as making misidentification hard to understand. It seems like perhaps a random pickup truck could be misidentified as perhaps a vehicle being used by a Hamas militant. But a group of World Central Kitchen trucks with their name all over it, driving down a known aid corridor — that becomes harder to understand as misidentification.

Yeah, it’s an important question. And at this moment, we don’t know exactly what the Israeli reconnaissance drones could see, and whether or not they were able to see, in the darkness of the night, the markings of the World Central Kitchen on the cars. But what is clear is that when the cars were found in the morning, right there was the big emblazoned logo of the World Central Kitchen.

Mm-hmm. I’m curious how you think about the speed with which Israel came out and said it was in the wrong here. Because as you said, that’s not how Israel typically reacts to many of these situations. And that makes me think that it might have something to do with the nature of the aid group that was the target of these airstrikes — the World Central Kitchen — and its story.

I think it does have to do with this particular group. This is a group that’s led by a celebrity chef, very high-profile, who is gone around the world to conflict zones, disaster areas, to provide food aid. And I also think it has to do with the people who were killed, most of who were Western foreign aid workers. Frankly, I don’t think we would be having this conversation if a group of Palestinian aid workers had been killed.

Nor, perhaps, would we be having the reaction that we have had so far from the Israeli government.

I would agree with that.

Adam, at the end of the day, what is going to be the fallout from all of this for the people of Gaza? How do we think that this attack on World Central Kitchen is going to impact how food, medicine, aid is distributed there?

So the World Central Kitchen has said that it’s suspending its operations across Gaza. Because it essentially seems that they don’t feel they can safely operate there right now. And several ships that carried aid for the organization, which were sort of just on the coast — those ships ended up turning back to Cyprus, carrying more than 200 tons of aid.

So aid that was supposed to reach the people of Gaza is now leaving Gaza because of this attack.

Yes. And it’s also had a chilling effect. Another aid group, named INARA, has also suspended its operations in Gaza. And it seems that there is concern among humanitarians that other aid groups could follow.

So in a place where people are already suffering from severe hunger, poor sanitation, the spread of dangerous disease, this is only going to make the humanitarian situation, which is already dire, even worse.

Well, Adam, thank you very much. We appreciate it.

Thanks so much for having me.

We’ll be right back.

Here’s what else you need to know today. The magnitude-7.4 earthquake that struck Taiwan on Wednesday has killed nine people, injured more than 1,000, and touched off several landslides. It was Taiwan’s strongest quake in the past 25 years. But in a blessing for the island’s biggest cities, its epicenter was off the island’s east coast, relatively far from population centers like Taipei.

And the first patient to receive a kidney transplant from a genetically modified pig has fared so well that he was discharged from a Massachusetts hospital on Wednesday just two weeks after surgery. Two previous transplants from genetically modified pigs both failed. Doctors say the success of the latest surgery represents a major moment in medicine that, if replicated, could usher in a new era of organ transplantation.

Today’s episode was produced by Lynsea Garrison, Olivia Natt, and Carlos Prieto, with help from Asthaa Chaturvedi. It was edited by Marc Georges, with help from Paige Cowett, contains original music by Marion Lozano and Dan Powell, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

That’s it for “The Daily.” I’m Michael Barbaro. See you tomorrow.

• April 5, 2024   •   29:11 An Engineering Experiment to Cool the Earth
• April 4, 2024   •   32:37 Israel’s Deadly Airstrike on the World Central Kitchen
• April 3, 2024   •   27:42 The Accidental Tax Cutter in Chief
• April 2, 2024   •   29:32 Kids Are Missing School at an Alarming Rate
• April 1, 2024   •   36:14 Ronna McDaniel, TV News and the Trump Problem
• March 29, 2024   •   48:42 Hamas Took Her, and Still Has Her Husband
• March 28, 2024   •   33:40 The Newest Tech Start-Up Billionaire? Donald Trump.
• March 27, 2024   •   28:06 Democrats’ Plan to Save the Republican House Speaker
• March 26, 2024   •   29:13 The United States vs. the iPhone
• March 25, 2024   •   25:59 A Terrorist Attack in Russia
• March 24, 2024   •   21:39 The Sunday Read: ‘My Goldendoodle Spent a Week at Some Luxury Dog ‘Hotels.’ I Tagged Along.’
• March 22, 2024   •   35:30 Chuck Schumer on His Campaign to Oust Israel’s Leader

Hosted by Michael Barbaro

Featuring Kim Severson and Adam Rasgon

Produced by Lynsea Garrison ,  Olivia Natt ,  Carlos Prieto and Asthaa Chaturvedi

Edited by Marc Georges and Paige Cowett

Original music by Dan Powell and Marion Lozano

Engineered by Chris Wood

Listen and follow The Daily Apple Podcasts | Spotify | Amazon Music

The Israeli airstrike that killed seven workers delivering food in Gaza has touched off global outrage and condemnation.

Kim Severson, who covers food culture for The Times, discusses the World Central Kitchen, the aid group at the center of the story; and Adam Rasgon, who reports from Israel, explains what we know about the tragedy so far.

On today’s episode

Kim Severson , a food correspondent for The New York Times.

Adam Rasgon , an Israel correspondent for The New York Times.

Background reading

The relief convoy was hit just after workers had delivered tons of food .

José Andrés, the Spanish chef who founded World Central Kitchen, and his corps of cooks have become leaders in disaster aid .

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The Daily is made by Rachel Quester, Lynsea Garrison, Clare Toeniskoetter, Paige Cowett, Michael Simon Johnson, Brad Fisher, Chris Wood, Jessica Cheung, Stella Tan, Alexandra Leigh Young, Lisa Chow, Eric Krupke, Marc Georges, Luke Vander Ploeg, M.J. Davis Lin, Dan Powell, Sydney Harper, Mike Benoist, Liz O. Baylen, Asthaa Chaturvedi, Rachelle Bonja, Diana Nguyen, Marion Lozano, Corey Schreppel, Rob Szypko, Elisheba Ittoop, Mooj Zadie, Patricia Willens, Rowan Niemisto, Jody Becker, Rikki Novetsky, John Ketchum, Nina Feldman, Will Reid, Carlos Prieto, Ben Calhoun, Susan Lee, Lexie Diao, Mary Wilson, Alex Stern, Dan Farrell, Sophia Lanman, Shannon Lin, Diane Wong, Devon Taylor, Alyssa Moxley, Summer Thomad, Olivia Natt, Daniel Ramirez and Brendan Klinkenberg.

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Kim Severson is an Atlanta-based reporter who covers the nation’s food culture and contributes to NYT Cooking . More about Kim Severson

Adam Rasgon reports from Israel for The Times's Jerusalem bureau. More about Adam Rasgon

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