Why Do Small Businesses Fail? Top Reasons For Startup Failures
Entrepreneurs and their startups make the business world go round. They are the ones who bring innovation, who quickly fill up new market niches, the most agile, responsive to change, adaptable… These are all qualities that the big and clumsy corporations lack. So why do small businesses fail then? If they are so efficient shouldn’t they be the ones left standing in the end? Although being small comes with many advantages, it has a lot of disadvantages also – lack of financing, HR resources, all kinds of resources… Starting and running a new company is not an easy task. Some researches show that only 1 in every 12 startups continues operations in the long run. According to these statistics, it would mean that more than 90% of all starting companies fail, which also mean that less than 10% are successful. So, if you are going to start a company, your chances are not that great… But why does this happen? Well, here we will show you some of the most common reasons and errors entrepreneurs make. Below is a cool infographic on which you can see pretty interesting statistics exactly on the matter. The Startup Genome Project’s research is based on data collected from more than 3200 starting companies and gives a clear picture about the most common reasons for failure. You can see some really interesting things here. For example, rising too much money turns out to be a risk for a starting company, because this can cause a premature growth of the business. Fast growth can be very dangerous for your business… Have a look below.
Why Do Small Businesses Fail?
According to the infographic, the number one reason for startup failures is premature scaling. The guys from the Startup genome think, that this brings many other problems with itself which finally leads to closing the business. However, this is a very broad reason and can not give many details about why small businesses fail so much. Premature scaling can lead to all kinds of situations such as: running out of cash, not enough market need, getting the wrong people in the team and so on. These are all scenarios that premature scaling can lead to and I believe they are more like the root cause for the failures. If you are interested to see some more detailed statistics on the matter, below you can check some interesting stats collected by statista.com:
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