2 Why do small businesses fail?

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Figure 4  SWOT analysis – strengths, weaknesses, opportunities and threats

David Mellor presented a number of reasons and ‘top tips’ to prevent business failure.

Using some ideas from David Mellor of the Guardian (2015) and Patricia Schaefer of Business-know-how (2001), we came up with ten reasons why small businesses fail:

  1. Not fully understanding what they are letting themselves in for
  2. Getting paid and bad debts/lack of capital/lack of liquidity
  3. Choosing the wrong business partner(s) to help grow the business
  4. Starting a business for the wrong reasons
  5. Poor management
  6. Insufficient capital
  7. Location
  8. Lack of planning
  9. Overexpansion
  10. Lack of website.

Let’s look at the ten reasons why small businesses fail in a little more detail.

2.1 Lack of preparation