Why Your Business is Failing – How to Make More Money in 2022

Poor understanding of the sector and failing to adopt the correct strategy extensively impact the growth and success of a small business.

Are you an entrepreneur, or do you desire to start a business? Like many other prospective business owners, your goal is to make maximum returns while mitigating risks and losses.

What we will cover in this article.

  • Financing Challenges
  • Inadequate Management
  • Unproductive Business Planning
  • Marketing Misfortune

The truth, however, is that running a business is much more complex than most people think. If you have a faint heart, you are more likely to incur losses and eventually close shop.

A successful businessperson can bring a product or service to a target consumer while at the same time mitigating company-specific risks. The business follows a proven strategy for profitability and sustainability.

small businesses usually fail because of inadequate capital or funding

Many small businesses out there offering different services and products are thriving. The Bureau of Labor of Statistics states 20% of small businesses will close shop in the first year. 50% will fail within the five years, while only 33% will still be running in 10 years.

With such statistics, any startup business will worry about closing shop sooner rather than later. As a new business, it’s vital first to understand what ails the small business. This knowledge helps understand the market correctly and learn how best to avoid risks or challenges.

Going by research, small businesses usually fail because of inadequate capital or funding, adopting a poor management strategy, relying on an ineffective business model/ infrastructure, and weak marketing ideas/programs.

Financing Challenges

Lack of sufficient capital is one of the leading reasons for many small businesses to fail. The business owner will have the right strategy to run an enterprise profitably.

However, lack of working capital hinders the service and product provision. The business owner cannot pay for overhead costs, e.g., water, electricity, or rent.

Furthermore, the entrepreneur has difficulties replenishing stock, paying vendors, employees, and other things.

Poor pricing also leads to small businesses failing. An entrepreneur will price the services/products lower than the competition to ward off competition or attract customers.

After factoring in running costs such as ordering, delivery, and marketing expenses, the owner realizes he is missing the mark. The business owner may have eaten into the working capital and hence has less money to restock or make new purchases.

A small enterprise or startup business appears less promising to potential investors. There is no proven record of accomplishment or history to gauge a company.

Venture capitalists, angel investors, financial institutions will be a little skeptical about offering funding or capital to the business.

Those willing will present the financing at a higher interest rate to minimize risk exposure. Without adequate capital and failure to secure investors, funding shuts many businesses.

Having decent startup capital is essential as this mitigates the need to make expensive deals with financiers.

Solutions to Financing Hurdles

A small business can minimize financing hurdles by coming up with a realistic budget. Thorough research is vital to have the correct values.

Having decent startup capital is essential as this mitigates the need to make expensive deals with financiers.

After having been in operation for some time, the business will have a history of trading, and by looking at the figures, it becomes easier for a potential investor to come on board.

Inadequate Management

Lack of excellent or proper management skills contributes to small businesses failing early. The business owner or the management team cannot identify or handle challenges due to insufficient knowledge or skill.

Running a corporation varies from one situation to another.

A business owner may have adequate hands-on experience to run a physical retail outline.

However, the skills may prove less effective in running an online e-commerce store. A senior-level manager may have difficulties managing and organizing a small startup business.

An effective owner may lack time to oversee the running of the business or may have excellent skills but poor delegation strategies.

A strong manager working with a weak team will more likely negatively affect a business. There will be misunderstandings and conflicts between the people involved in managing the business.

A smart business owner invests in a highly skilled and competent team.

Solutions to Inadequate Management

A smart business owner invests in a highly skilled and competent team. The owner, if involved, together with the team, will possess skills in different areas such as hiring, finance, marketing, delegation, and more.

In addition, it’s essential to have a continuity plan to prevent backlog or gaps in case a team member leaves.

If running a business proves challenging, outsourcing the task may be more viable. However, this may come at a higher running cost and takes time to embrace the outsider fully.

NB- Management is more than overseeing the daily running of a business. It also entails looking at the future and carving the right path in line with a business’s goals, growth, and long-term sustainability.

Unproductive Business Planning

How often do you hear about a small business’s plans not working? The strategy may have worked for a similar company but isn’t working for yours. Or it may be working but at a much slower rate.

The truth is that many businesses don’t give planning the importance it needs. Some owners will use a “trial & error” approach, while others will stick to archaic plans that have been overtaken by invents.

Why would you use a program that worked for a brick-and-mortar store for your online e-commerce store?

A good business plan offers the following:

  • Clearly describes the business and its goals
  • Covers the management and employee needs
  • Focuses on market opportunities and threats
  • Highlights capital needs (budgeting, projected cash flow, financial constraints)
  • Looks at the marketing campaigns and initiatives
  • Analyses the competitors, both current and future

A smart business owner will develop a good plan before starting a business. The program will change over time to address different needs and emerging threats.

A strategy may be very effective now but will become unreliable due to legislative, technological, socio-economic, market, and other changes.

Solutions to Unproductive Business Planning

An entrepreneur should know about a business, market, current, and future threats. With such information, the owner comes up with the most feasible plan that suits the business’s goals.

A company’s specific business plan should describe the business and cover all areas that affect a business, including employees, marketing, and financing.

Marketing Mishaps

Business owners work hard to keep the business afloat and profitable. They will have a well-laid business plan, a strong management team, and good cash flow/ capital. Sadly, a good number will give little or no attention to likely risks or mishaps.

There is the likelihood of a manager not showing for work, a supplier/ distributor not delivering goods, or government legislative changes negatively affecting the business. When this happens, no capital, superior management skills, or effective plan will offer a solution.

A business may underestimate the funding requirements, overshoot its budget, or fail to secure capital or financing from a promising investor or financier. If not addressed on time, the business may end up on its knees.

The solution to Marketing Mishaps

An entrepreneur needs to understand that there is no foolproof business strategy. Unforeseen risks and challenges exist and will hover around a business.

Therefore, it’s paramount to give the mishaps the attention they need.

Having a fallback plan is critical to avoid closure. For instance, an alternative financier or supplier if the first one doesn’t come through.


The above article highlights the main reasons why most small businesses fail. Additionally, you also get solutions to the challenges. By using this guide, your small business will weather the storm and grow and remain sustainable and profitable in the long run.