Top 5 Reasons Why Businesses Fail

Success and failure are two phenomena that can occur to anybody or anything, be it an individual in college, someone trying to build a career in a particular industry, or even a business that has just been established with a good prospect for the future.

Success is neutral; the same is true of failure. They don’t select people or things based on any form of bias before occurring to them.

In fact, there is no such thing as “immune against failure.” Everyone and everything has the opportunity to succeed, and at the same time, have the probability of failing.

It is important to come to terms with the fact that the outcome of an individual’s life or a business depends on many factors that are not entirely out of the control of such an individual or a business owner.

There are many reasons why businesses (especially small businesses) fail. However, let’s consider the top 5 reasons why businesses fail and what business owners can do to overcome this failure.

Time Perspective and Business Sustenance

Time does not change anything; it only reveals the effects of people’s decisions and actions over a period. Businesses do not grow and succeed with the chronological passage of time. At the same time, no business fails arbitrarily with time.

According to Brian Tracy, the law of cause and effect applies to money as much as to any other subject.” He posited that success is only an effect, and as such, it is a product of very specific causes.

When people identify the cause of business success and implement them, they will get the effects that are designed by nature to follow them.

First and foremost, businesses fail because organizational leaders or small business owners fail to recognize the causes of business success and pursue them to see the effect (growth and development).

On the other hand, organizational leaders or small business owners subconsciously subscribe to the causes of business failure at some point without their complete awareness. In the end, they get the effect (loss, bankruptcy, winding up).

Besides the fundamental law of cause and effect, there are 5 reasons why businesses fail, as discussed below. It is vital to note that they are also products of the law of cause and effect because this law sits at the root of everything in life.

5 Reasons Why Businesses Fail

Most businesses (especially small businesses) fail for many reasons. However, these are the five most common reasons why they fail.

· Lack of well-defined vision and goals

There is hardly one global brand whose founder or organizational leaders subconsciously walked into such global success and reputation overnight without well-thought-out plans.

Success and growth are the fruits of well-defined visions and goals. Many businesses owners (especially small businesses) do not have a well-defined vision and mission statement for their organization.

Therefore, they operate without a sense of purpose; and this is like a journey without a destination, such that anywhere can eventually become a destination (even failure).

Business owners need to think through the vision of their company and document it on paper. After that, they can draw up short, medium, and long-term goals to be achieved in the lifetime of the business.

This will go a long way to keep the founder and all the staff of an organization focused and motivated towards success, growth, and development.

· Poor leadership and management

According to Dr. John C. Maxwell, “everything rises and falls on leadership.” Business success is a product of effective and efficient leadership. While, business failure is a product of purposelessness, indiscipline, poor management, etc., in leadership.

Most businesses are the outward manifestation of their leaders. A successful leader will breed a successful company; while, a leader who’s a failure inwardly will breed a failed organization.

Goal-setting, planning, decision making, coordination, directing, etc., are all responsibilities of organizational leaders. These are the management functions that drive every organization.

Poor goals, ineffective planning, poor decisions, lack of coordination of resources, etc., are automatically equal to business failure.

Therefore, organizational leaders must subscribe to continuous growth through learning by attending seminars, workshops, taking online courses, and so on to grow their knowledge to be better informed for superior decision making.

· Poor recordkeeping

Success, growth and development come by conscious daily actions with the required discipline. One of the qualities of every successful organization is accurate, timely recordkeeping. When memory forgets, records remember.

Proper recordkeeping will necessarily provide the required information that helps management make an informed judgment and take appropriate decisions for business growth.

Poor accounting records will breed mismanagement of resources, thereby creating a loophole for fraud, theft, and misappropriation of an organization’s resources. If this lingers on for too long, it can lead to the winding up of a business.

· Poor customer satisfaction

Companies are in business because of the customers who need their products and are willing and able to pay for them. When this relationship is breached, such a company will begin to plunge into failure in the long run.

Many businesses grew up and suddenly began to retrogress because their customers no longer find satisfaction in their products and services over time. Some customers quit patronizing companies due to poor customer care service irrespective of the quality of products they offer.

Therefore, organizational leaders must keep in touch with customers through the research and development (R&D) department to know what their customers need and the areas they desire the organization to make adjustments to enable them to retain such customers.

· Failure to adapt to market trends

Every industry evolves with time, and every season comes with its trends, operational systems, etc. Organizations that fail to recognize a shift in the market trend, consumers’ tastes, and needs will soon be out of business because people are motivated by current trends.

Almost every business is going online; therefore, a company that remains offline, hoping to serve its customers through a one-on-one transactional process, may not be able to survive the next decade.

So, organizations need to research and find out the current trends of the industry where they operate and find ways to blend to remain relevant to their customers and the entire industry.


Most organizations that neglected the top 5 reasons why businesses fail, as discussed above, are the struggling ones today. Remember the law of cause and effect, “every effect is traceable to its causes.”

Upstack remains ever current with operations that help businesses grow, especially in the area of flowing with online trends. We can help your company remain relevant in your industry through a well-orchestrated website to keep you active online for your customers’ reach.

We can also help you create accounting records systems that help you manage your transactions daily, weekly, monthly, or yearly. We are just a CLICK away! Contact us now!

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Originally published at on Feb 27, 2022, by Lucky Ezeinuaku.




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