Why Small Businesses Fail: 10 Surprising Reasons

10 reasons why small businesses fail Carissa Hill

In my 10 years of business, I have noticed 10 reoccurring themes why small businesses fail and never seem to make a lot of money. I myself managed to rapidly grow a small home business (which I operated after hours from my day job), into a chain of 3 stores and an international product range which ran completely without me in it, just by mastering these 10 things. My goal for you is to ensure you have a clear understanding of why small businesses fail and to learn from these mistakes.

The business owners who seem to have rapid growth and success have these 10 things covered.

They never seem to have to worry about things like paying staff, paying bills, where their next client is going to come from, or never being able to take a break.

So, Is your business making any of these 10 common mistakes that keep small businesses, well, small?

Video: 10 Reasons Why Small Businesses Fail


why small businesses fail no clear vision
Source: https://flic.kr/p/4aZAKZ

The number one reason why small businesses fail is because they have no clear vision for where they are actually going. They started a business for some reason but they have no clear goals in place and they honestly have lost sight of what they are even doing it for.

When I started my business, it took me about a year to figure out what I wanted from it, but then when I decided that I just wanted to employ people to do the work while I sat at home (or wherever else in the world) and did the marketing and booked people in. I knew what I wanted, and I made it happen.

They are just working for the sake of working, they have half assed goals which they don’t even want bad enough, they have no dream life to work towards, and they are not sure what they want the business to look like 1, 3 or 5 years from now.

And I get it, you know, sometimes you can feel stuck in amongst all the pressure, the responsibilities, the bills, the world around you that is constantly changing, the competition, the idiot clients, whatever, but it’s all part of running a business, and you are in control of it.

A fun part of running a business though is to look at what YOU have already created, know that you are already doing SO MUCH MORE than the majority of people on the planet, and think about what you really want from your life and business from this point forward.

Because if there are other people out there running businesses and living lives that you envy, the absolute truth is that you can have that for yourself as well. You are human, they are human.

Think about how you want to spend your days, your mornings, your evenings. Where do you want to live? What do you want people to say about you and what you’ve done? How do you want to be remembered when you die?

You can incorporate all kinds of questions like these into the vision for your business and your life. Get creative. Think outside what’s normal, and think: how can I turn this business into something that fills my life (and my bank account) with happiness and freedom!?

Seriously, close your eyes, visualise what you want, and then write it down, make a plan, and start acting on it TODAY!



why small businesses fail process
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This is often because the owner is trying to do everything or too much themselves, they are keeping all their knowledge inside their brain, they don’t trust anyone else to do things as well as they do them, and that’s because they haven’t systemised the way they do things and trained their team to follow the systems. This is why small businesses fail.

Yep, I did this too at first, and it sucked. Everyone would always call me asking what to do and where is this thing and how should I reply to this customer.. etc etc – then I started to document the answers to every question, make videos of how to do things, write dot point instructions for everything that needed to be done, and was able to then get staff members to train other staff members and have a documented solution and procedure for everything. I could finally sit back and know that things were running smoothly.

If this is you, let me ask you something… If you died tomorrow, would your business survive? Would it be able to run without you? Would it be able to be sold? Or would it die with you?

Here’s a fun fact: your business is not you. You started the business yes, but you have created something outside of yourself, which makes you a little bit like your own God.

You have the power to create your own little dream world and universe within your own business, and set your own rules, and give people jobs, and be a great leader that your staff and clients worship, if you want them to, but you NEED to get everything outside of your own head and systemise it.

Your team members, and other people in the world are SO much more capable that you give them credit for, and if you want a business that you can be the owner of rather than the operator, then you need to learn to give trust first to everybody.

And honestly just accept the fact that yeah, nobody else is ever going to care as much as your business as you do, but that still doesn’t mean they can’t help you to build a great business and make your dreams come true.

Seriously, systemise your business, it doesn’t have to be complicated, it can be in dot points written as simply as though a 5 year old could follow them. You can video record how to do things even and save them in a folder. It will make training new staff and expanding your business so much easier.


why small businesses fail empty store

If a business doesn’t have enough clients it’s usually because of the following reasons:

  • They’re not selling something that people actually want.
  • Their marketing or advertising isn’t done well enough.
  • They are not building relationships with their clients and encouraging repeat business.
  • They have no sales or marketing strategy in place.
  • They’re focussing too much on getting new clients rather than leveraging off the ones they already have.

All of these things can be overcome when you stop thinking about yourself and what you want for a moment and start focussing on how your business can provide the best possible customer experience for your clients.

One of the main reasons my business attracted enough clients to keep growing and expanding was because it looked great (branding) it was unique and had a personality and theme that attracted the clients we wanted to attract, it provided an incredible customer experience, we made it really easy for people to contact us, enquire and book, and we had a great system in place to keep people coming back & telling their friends.

Starting with their first point of contact with you which could be an ad, your website, your social media account, your shop front, whatever – if you don’t have consistent clients, it doesn’t mean there is anything wrong with the economy, it means there is something wrong with the way your business is communicating with the world.

The number one reason clients don’t come back to a business or don’t keep doing business with somebody is because they don’t feel valued or important. A big factor in why small businesses fail is that there is a lack of repeat customers.

So really take a look at how you can make your customers form an emotional and loyal connection with your business and your brand, and how you can provide them with the most amazing experience that they want to tell everyone they know about you, this alone will help your business grow rapidly and organically.


why small businesses fail stressed owner
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When you start a business with a small budget or non existent budget it can be difficult to consider outsourcing or hiring anyone, and often there isn’t enough work to do so in the beginning anyway, but as you grow, and if you want to grow, you NEED to let go of trying to do everything yourself and outsource the things that you either don’t enjoy or are not the best use of your time. A big reason why small businesses fail is that the owner just does too much.

You can start cheap by getting a virtual assistant to do one hour a week or a day, or even organising a trade with somebody who does something that you need and who you can help with something they need!?

It’s kind of like dropping your kids off at school for the first time when you let go of a part of your business to let someone else look after it, scary at first, but then you never want to go back.

If you want to build a great business that continues to grow, you need to build a great team that can help you get there.

It’s pretty scary at first yeah, I remember the first time I stepped out for an extended period of time (went to the USA for 5 weeks), but honestly, it was so good, and I came home with more money than I left with. That was the turning point for me. My new business growth strategy is create > systemise > delegate > repeat.


why small businesses fail low prices

Another big mistake small business owners make is to price themselves too low from the start or to provide an ‘affordable’ service that brings in almost zero profit. And that’s why small businesses fail.

I’ve done this myself too, and as your business grows, and your expenses grow, if there is not enough profit on your products and services, you’ll end up getting yourself into trouble.

Another mistake business owners make when thinking about the money they make is focussing on the turnover / revenue instead of the profit they make per sale.

Just because you sell something for $100 doesn’t mean you actually make $100 every time you sell one, once you add up all the time, rent, power, subscriptions, wages, phone bills, website hosting bla bla bla, you might be only making $10 profit on that thing.

Turnover equals vanity, profit equals sanity.

There are people out there who can afford what you want to charge, so raise your prices, raise your standards, raise your game, and position yourself where you want to be. Want to know why small businesses fail? They are too afraid to charge enough.

I’ve raised my prices 3 times in 2015, and you know what? People will pay it. They will. And the quality of the clients will improve with the higher prices usually too. They will take you more seriously, they will value your service more, and they are more likely to respect you for charging what you’re worth.

You have a choice on where you position yourself in the market. Do you want to be the cheapest? Or the best? I wanted to be the best.


why small businesses fail no relationship
Source: https://flic.kr/p/kiXGrR

This kind of comes back to what I said in number 3. If you want to be a recognised quality brand, you need to form great relationships with people. Poor customer relationships is a key reason for why small businesses fail.

Your clients, your team, even your ‘competitors’ of which I believe there are none if you have a unique enough brand, but that’s another topic altogether…

You need to focus on giving more than taking, and you need to focus more on what people want from you rather than what you want to get from them.

When I changed my mindset around this and read one of my favourite ever books “The Go Giver” it dramatically improved my business and my life. Why small businesses fail? Because they don’t give back enough.

Every customer that comes in to your business or buys from you should be made to feel special, and not just once, ongoingly. Check up on them. Follow up. Call. Send an SMS. See how they are. Show that you value and remember them, and you will have no problem with customer retention and referrals.

Treat everyone you meet as your best friend. Put happy vibes out into the world. Love your business passionately and others will love it too. Build a network, get out there, meet people, tell your story, answer questions, have fun…

I’ve been doing this for years.

Don’t let anyone forget you exist and make sure you become a respected and admired leader that people want to follow rather than a feared boss that people only follow because they have to.


why small businesses fail stressed owner
Source: https://flic.kr/p/fPhwJX

You need to know your numbers. And if you’re not a numbers person, you need to hire somebody who is. Not knowing your numbers is a critical factor in why small businesses fail.

Business is about numbers whether you like it or not, and you need to learn to understand and love them if you want to get on top.

I personally suggest to all my clients that they keep a weekly or monthly scorecard, which is just an excel spreadsheet where you track EVERYTHING that you do and that happens in your business so that you can see all in one place how everything is going.

Have a weekly or monthly meeting with your team, your accountant, or even yourself to review your numbers and make sure you understand where you are, where your money is going, and where you are going all at times.

I take myself out to sushi train or a coffee shop weekly or monthly and review my numbers and it becomes fun, challenging and you learn to take yourself and your business a little bit more seriously.


Successful businesses know that it is all about the customer. The customer is the priority. The customer decides if your business will be successful or not, and the customer is who gives you their trust and their money.

In order to attract the customer correctly from the start, you have to give them what they want to see rather than what you want to show them, and the way to do this is to stop talking about yourself, your products, your services, your features etc. Stop it.

What you should be doing is talking to the customer about the results your business can provide for them, how they will feel when they visit you, walking them through the experience they will have with your company, letting them know you understand them and that you are here to solve their concerns.

Take a look at your website and current marketing and take a look at whether you are talking to your audience or talking all about yourself. If the latter, consider making some changes.

I try and make sure that in everything that I do, the customer can see what my business can do for them, what the end result will be, give them testimonials, proof of results, and as many other cool things that they want to see, rather than what I want to show them.


A smart and successful business owner knows the importance of continually investing in their education. It keeps you motivated, it keeps you learning, it keeps you growing.

Successful business owners always look at the long term return on an investment in their business and can see the value they will get out.

Unsuccessful business owners will look at any expense as money they have to spend and don’t think about what they will get out of it at all. This is a key factor why small businesses fail.

Books, courses, coaches, mentors… if you want to get somewhere fast, find someone who has already done or is already doing what you want to do, and pay them to teach you how to get there.

I’ve personally invested over $100,000 in my own education over the last 5 years + numerous books, blogs, youtube trainings etc – you’ve got to be constantly learning. It’s so motivating and so worth it.

I used to be someone who thought I knew it all, until I took my first business course and holy wow it changed my life forever. Now I’m a course junkie and addicted to learning.

If you’re totally broke, that’s ok, go to a library, it’s free, all it takes is an investment of your time.


why small businesses fail team
Source: https://flic.kr/p/6wEuH8

They say the top is lonely. And so is trying to do everything yourself and be a huge success when nobody around you is successful. Having no support is a key reason why small businesses fail.

Thanks to Facebook & meetup groups now it’s easy to find people you want to be around and join them, though be sure to make sure you are surrounded by the right people.

It’s easy to join a group full of complainers, even if they are business owners, and that’s not going to inspire and empower you to grow. And that’s another reason why small businesses fail….they are hanging around other businesses who are failing!

What you ideally want to do is join some kind of mastermind group run by somebody you admire or who can teach you things you want to know and support you along the way to actually getting there.

Doing this has made a considerable difference in the growth of my companies, the standards I set for myself and the quality of my life in general.

By surrounding yourself with a network of positive minded people who don’t let anything get in their way and are there to help lift each other up, hold each other accountable and help each other through difficult times, you will feel much more confident and supported than if you try to do everything on your own. Doing everything yourself is a major reason why small businesses fail.

If you haven’t experienced a great course or mastermind support group yet, and maybe you want to finally step out of your business this year and work ON it not IN it,  you can get involved in my online course and mastermind group called Destiny Designers, which teaches you exactly how to do everything I just went through in this article and provides you with ongoing positive support on your journey. You can get more details at: www.carissahill.com.au/destinydesigners

About the author: Carissa Hill specialises in rapid business growth through Facebook marketing and has an intimate understanding of why small businesses fail and why others are wildly successful. She is available for corporate speaking and workshop facilitation.

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