Reasons Why Businesses Fail Over The Next 5 Years

Blockbuster, Radio Shack, and Tower Records are some of the many failed businesses. Whether you are a local small business or a VC-backed unicorn, understanding why businesses fail can help you avoid them. Surviving the first year of business is hard enough, but it doesn’t get any easier afterward. Nearly half of all businesses will fail by their third year.


Each year, millions of entrepreneurs and business owners start new businesses. Unfortunately, only a fraction of them survive. It is essential to stay up-to-date on business failure statistics and rates. By understanding how many businesses fail, you can take steps to prevent your own from becoming a statistic. Aside from cash flow problems, business failure is primarily a result of poor marketing. Even the best product will only win with a successful marketing strategy. In addition, having knowledge and the proper training is critical. Portocol can help you make the right decisions that lead to success. 

Excessive Spending

Although most businesses fail, four out of five new small businesses survive their first year, and more than half survive the past ten years. And even though there are many reasons for business failure, some are simple to avoid. For example, excessive spending is a common problem for entrepreneurs. Consumers are constantly bombarded with advertising messages that try to entice them into indulgent buying habits by telling them their products will fulfill all sorts of needs and dissatisfactions. It can result in overspending, unnecessary additional debt, unused items, and family arguments. Practicing mindfulness and journaling your daily expenditures is an excellent way to combat this issue. It will help you identify trends over time and help you control frivolous spending habits.

Lack of Focus

Business owners must be able to focus on their goals and not be distracted by the day-to-day tasks of running a business. They must understand their customers, their needs, and the problems they face and be able to solve them. Businesses that must fully understand their target market are setting themselves up for failure. They must be able to provide quality products and services that are in demand and charge fair prices. Having the passion to run your own business will motivate you to work through long days that seem like an uphill climb. Having your “big why” will drive you to overcome all the reasons businesses fail. Without it, you will be easily defeated.

Lack of Innovation

Regardless of the industry or type of business, innovation is critical to keeping up with the competition. With innovation, your business will stay caught up and eventually gain market share. You may have a great product or service, but you need to keep up with the pace of change so that it will become obsolete quickly. It happened to Nokia and Kodak – two massive companies that failed to innovate and allowed their competitors to take the lead. When it comes to innovation, many things need to be corrected. It can include lacking resources, culture, or naysayers who won’t support the idea. Also, poor timing can be a big reason a business fails to innovate. It could be that the company launched its new product at a lousy time – during an economic downturn or in the middle of a pandemic.

Poor Marketing

One of the top reasons businesses fail is that they need to market more effectively. It’s essential to have a clear strategy in place and be able to measure the results of your efforts. Otherwise, you may need more valuable leads and sales. Another big reason businesses fail is that they need helping markets. It could include a shift in consumer habits or changes in technology. You will be included if you stay on top of these trends. It’s also essential to avoid overdependence on a single customer. It can be risky if that customer stops purchasing from you or leaves the industry altogether. 

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