Why Do Most Small Businesses Fail?

Why is it that so many small businesses fail within five years? What causes these high failure rates, and what can you do to avoid them?

There are plenty of reasons a business can fail including lack of planning, poor management, not enough capital, or personal reasons.

Recently I've come across a business for sale similar to a business that I started in 2008, Narien Teas. The owners after two years have put the business up for sale and are not accepting orders anymore.

What would lead them to shut down a business that they have poured time, money, and energy into for over two years?

What i've noticed in most failed businesses, my failures included, is that they were started for the wrong reason, money.

My goal wasn't to die the richest man in the cemetery. It was to go to bed at night saying, we've done something wonderful. -Steve Jobs

When an entrepreneur starts a business for the sole purpose of financial gain a few problems can occur.

Saturated Market

The established businesses in an industry can usually sustain loss for a lot longer than a up and coming buisiness can. It can take a lot of capital to enter a highly saturated market.


There are business opportunities everywhere, ideas are a dime a dozen and it is easy to get distracted with “the next big thing” or new business proposals. If you have already started a business my advice is to write them all down and save for later.

Lost Of Interest

Often business owners will lose interest in their venture, simply because their passion wasn’t in the business in the first place. They might see other opportunities that appear more viable, or perhaps they aren’t seeing the results that they were expecting soon enough.

What To Do?

If you are thinking about starting a business, learn as much as you can about the industry before you start. Most of all make sure you are passionate about your product or service and how it helps others, not about making money.

I build stuff, like Narien, the Useragent API and the Email API