Business Failures: Don’t Make These Mistakes

Business Failures Are Common: Learn From Others Mistakes

When the startup Gigaom folded in March 2015, the company’s announcement included the following sentence: “Business, much like life, is not a movie, and not everyone gets to have a storybook ending.” This is important to remember since, according to the Small Business Administration’s (SBA) Office of Advocacy, the survival rate for new businesses is dismal. Only one-third of all businesses last 10 years or more, while half of all businesses fail within five years of opening. These rates haven’t changed over time. The odds, it seems, are stacked against business owners. However, you can (and should) learn from mistakes made by other businesses to give yourself a better shot at going the distance.


Bradley University’s Illinois Small Business Development Center found that incompetence was the leading cause of small business failure — according to their research, 46 percent of businesses fail because of this. The study cites the following issues of incompetence: owners living beyond their means, irrational or uneducated pricing strategies, poor planning, no record-keeping experience, and nonpayment of taxes. In other words, your business will fail if you aren’t ready to be a business owner. Examples of incompetent business owners ruining their businesses are not hard to find. Just don’t confuse crooked owners with incompetence. There is a marked difference.

If you are unsure about specific topics, surround yourself with knowledgeable people to avoid this pitfall.

Overspending and not Enough Capital

QBotix, a startup that attempted to bring robotic solar tracking to the market, ran out of time and money to finish the job, even though the company raised tens of millions of dollars. Because of this, it ceased operations in August 2015. Small businesses will find themselves in the same boat as QBotix if they fail to budget and raise enough money — two essential things that can be easily lost in the excitement of opening and running a new business.

The Wall Street Journal has a startup calculator that may put a few things into perspective. Also, companies like Moody’s Analytics offer courses that can be helpful for new business owners.

Overreaching Product Line

While a scourge of scatter-brained small businesses is attempting to be everything to everyone, this can and has been a significant pitfall for established brands. For example, look at what happened when Hillshire Farm, a brand that has existed since 1934, over-diversified its product line. Not only were there too many products, many of which found little interest in customers, but the company also had to keep prices high to maintain a catalog of 2,500 items. Once Hillshire Farm slashed the items it sold to 300, it was able to lower prices and put more focus on the core items that made it famous in the first place. The moral of the story: Stay focused and keep up with what you do well.

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Todd Smekens

Journalist, consultant, publisher, and servant-leader with a passion for truth-seeking. Enjoy motorcycling, meditation, and spending quality time with my daughter and rescue hound. Spiritually-centered first and foremost. Lived in multiple states within the USA and frequent traveler to the mountains.

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