Why do Businesses Fail? Part VII

Published: February 3, 2020

Courtesy of maxsoutter.com business

My name is Donald E. Mitchell, D.B.A., M.B.A., B.B.A., and I am an entrepreneur. Today’s blog is a continuation of a 10 part series on “Why do Business Fail?” As have been seen up to this point, there is much reasons why businesses fail. Nevertheless, this is not a new phenomenon; researchers have been battling with finding the answer to this question for many years. And one reason that they have found to be an issue with success is not developing a business plan.

Researchers have found that most businesses fail within the first five years of operation. But if they get past the five years, the chances of them surviving are higher now than before up to the tenth year of business operation. The fact of the matter the failure of the business is due to the entrepreneur. According to SBA, there are over 28 million small businesses in the U.S., and only 50% will survive, and only one-third will survive ten years or more. The life of an entrepreneur is challenging, with a variety of moving parts in entrepreneurship with any one of them being able to put one out of business.

No Differentiation

Having an excellent product/service is not enough; one must also have a unique value proposition without one the business lost among its competitors. Being different is the key here and what distinguishes one organization from another. Ask your self what makes your business different from your competitor? What is it that brands your business unique? Can you capitalize on this difference over your competitor?

Ignoring Your Customers Needs

The lifeblood of any business is its patrons. So, entrepreneurs should listen to your customers, for it is cheaper to maintain your current customer base over that of procuring new ones. Ask your customers through surveys if they still love your product/services. Find out what they are saying through social media, what are they saying about your company? So, the question is, are you listening to what your customers are saying, and how do you plan to counter the narrative?

The inability to learn Mistakes

In life, we all make mistakes; the question is, do you learn from them. Yes, failure can seem to be a bad thing; however, even in defeat, one can learn from it and make adjustments and turn the failures to successes. The problem here that most people don’t take a second look at a defeat and its cause and seek to learn what went wrong and correct the problem. The failure of a business is due to multiple reasons, not just one. It takes an even stronger individual to admit to a mistake and even stronger one to dissect a failure and its causes to find that hidden nugget of why and turn it around into victory.

Poor Management

Management is a vital area of why businesses fail. Either the entrepreneur lack management experience or the knowledge of the principals of management. Henri Fayol (1860) can be arguably one of the fathers of business administration, for it is his work in business administration that still used today. His, 5-step process of what managers do is still relevant and is 1. Planning 2. Organizing 3. Directing 4. Coordinating 5. Controlling.

These 5-step process of what managers do are essential in the practice of business, and the continued management process of a going concern.

For example, the entrepreneur starts with some plan the forecasting and execution of the said plan. The entrepreneur organizes all the resources needed, including personnel, to carry out the project. The entrepreneur now directs the operation of the program, and coordinate the functions on how it is supposed to work. Through the feedback of the process, the entrepreneur makes changes and adjustments and analyzes the deviations. It is at this time when the entrepreneur will look at the project to make sure it is on track for the project goals, if not adjustment made to get it back on track.

So from a managerial standpoint, it is always the entrepreneur manager’s responsibility to bring the project into submission or find an administrative process that will. It is the entrepreneurial manager’s fault if the project fails to reach is the project’s anticipated goal, not the business. So the entrepreneur’s management process would be their evaluation and the handling of any problem within the firm. Poor managerial strategies of the entrepreneur can be directly tied to the entrepreneur and can only be overcome through having an excellent administrative staff.

Success or failure falls in the responsibility of the entrepreneur and the administration team. The entrepreneur’s managerial team can not be expressed enough how important it is to have capable individuals at these various levels to enhance the managerial strength of the firm and its prosperity to all stakeholders.


In conclusion, it can be seen that there is no one big thing that causes businesses to fail; it is a combination of many moving pieces in the business ecosystem. Nevertheless, without good managerial practices and the followup to ensure the project is on track and adjusting it if need be to put back on track, then said project or business Is doomed for failure. We will continue next week with part VIII of “Why do Business Fail?” And as always, let us know what you think in the comments section.

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