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  • Consultant at NHCS

Why do business startups fail?


Starting a new business is a promising task because it is much more difficult than we think. Rarely, a business runs smoothly with very minimal effort. But the question arises why do many businesses fail? For what reason and about how many fail? The reasons are many and deep that you must know before starting a new business.

What is a small business and why new business fails?

The Small Business Administration (SBA) tells that a business is considered small when they work with employees less than 500. From this, we can say that there is a huge number of small businesses prevailing even if they look large. Nearly every month many small businesses begin but the rate of their failure is very high. As an estimate around 20% of businesses fails in their 1st year, around 50% fails within the next 5 years and almost 65% of business fails in around next 10 years.

What are the reasons why a business fails?

The number of startups is very high and gradually it starts failing. There are different reasons why these startups fail.

The following are the reasons:-

1. Shortage of money-

One of the main reasons for the failure of the startup is the shortage of money. It may be due to non-income, because of which the cash vanished from the business. The reason behind the shortage of money may be poor management of cost or it may be that the sales of the business were not up to mark. Vanishing out money may involve the inability to get finance-related needs that will help a business in smooth running in their early stages or we can say in commencement of business or unless a business starts getting profits.

2. Inaccurate way of Advertising-

The next reason behind the failure of a startup is inaccurate means of advertising. Nearly every business startup starts its business by focusing on everyone. This will not give a proper result. They also try to focus or we can say target everyone in their local surroundings. To improve marketing business needs to clearly define their availabilities, with this they can focus on the right people and in the right market.

3. Lack of knowledge-

The next reason for startup failure is that they don’t have full information about what their customers need. Many businesses think that they can serve everyone in the market as they don’t exactly know about their customers but they fail because they latterly realize that no one requires their service. By properly analyzing the market you will know exactly what the customers require and what is the need of the time.

4. Poor partnership-

Another reason for the failure of the business is that in the starting every business needs partners. One partner is an expert in one field and another is an expert in another field and one may help financially. The reason behind failure may be that their ideas will mismatch which will give rise to conflicts. The reason may also be that one partner work harder than another partner and another one thinks that he is working much harder than the other one and this gives rise to conflicts between them and which results in the breakup of the partnership and failure of the business.

What are the points to avoid startup failure?

Due to so many reasons for the failure of startups, a business must adopt a few points which will help them in avoiding failure.

Here are a few points to avoid business failure:-

1. Set Objectives-

One of the best ways to avoid the failure of startups is by setting objectives. One should know exactly what and where their business should stand, and what the needs are the requirements of their customers because without having an objective you can’t gain profit and you have no idea of where you are going or leading your business.

2. Analysis-

Before starting a business one should know everything about the business and its market. They should also know what their customers want. They should have complete knowledge and understanding of their cash flows, their needs, and requirements. The more knowledge we have the more efforts we will have to help our startup from being failed.

3. Love and respect your work-

The next way to avoid our startup from failure is that we should love and give complete respect and dedication to our work. One should be extra enthusiastic about their business otherwise it will just be considered as a job that is just a need to work for.

4. Don’t Give Up-

The next way to avoid business failure is to know how great your business is it may also have bad times and also there will be many times when you feel down the track or de-hearted for your business and you completely decide to finish up all things but this is the time when one should give extra efforts and up extra energy to save your business from failing. These extra efforts will eventually give fruitful results for every startup.


While concluding with the topic we will again say that many startups fail in their early days because many things should go in the right direction to get success. To achieve success you must follow all the above-mentioned steps to avoid our business startups from failure. Mainly you should have complete knowledge about your startup before stepping into this field.

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