Browsing Tag

causes of business failure

Reasons for Start Up Failures in Home Business

I have recently been reading about the main causes of failure for start up businesses and I found them interesting. I will discuss these in this posting in the light of home businesses or businesses started by people who do not want to start by investing too much money upfront.
Many people mistake a hobby for a business and vice versa. This often results in lifestyle businesses. These are businesses that do not grow at all but are simply there to fund a lifestyle. There is no strategy as long as it allows the founder to supplement his/her income. Ideally a business should grow to the level that it requires your full time attention before you can institutionalise it where it does not need your hands own involvement.
Some fail because they fail to self appraise properly. For example considering oneself an entrepreneur simply because one is good technically. Technical competence does not easily equate to entrepreneurial competence. For example a skilled dentist does not necessarily make a dental entrepreneur or a skilled investment banker does not necessarily make a bank owner.
Others fail because of lack of commitment and motivation and/or underestimating the required effort to convert the opportunity into a realistic business proposition. Many people assume that once they start the business will automatically do well. They do not realise there is need to exert massive energy and effort to overcome the inertia of the business. For anything to move forward you spend more energy in trying to overcome inertia and cause it to be mobile. Inertia is the inability, unwillingness and resistance to action or motion. Anything in life requires significant force to overcome this inherent tendency. Business does not simply flow but require commitment and strong motivation for someone to start them. Many would be business owners underestimate the amount of energy required to convert a business opportunity into a viable business. In my work with online multilevel entrepreneurs, I have discovered that many sign up to start but never overcome that inertia even though the business system we work with does not require financial investment to start. You can check it out at
Other start up business and home businesses fail because of inadequate financing often due to overly optimistic sales projections. Many people suffer from an illusion that comes from unproven sales projection. This results in the business failing to meet its short term financial obligations. There are many multilevel business opportunities like SFI, Forever Living and Syntek which require minimal cash investments because of the way they are structured. These are preferable for those who are not good at sales projection. They are proven systems.
Another cause of failure is misreading the market, often indicated by failure to reach the “critical mass” required in sales volume and profitability due to competitive disadvantages or market weakness. One can often assume more demand than actually exists in the market. The net result is that you take your business to market with heavy stocks and machinery investment. Once all your money is locked into the business you then discover that there is no demand. A simple example is numerous first time authors who self publish and print thousands of copies of their book because it is a must read. They only discover with money locked into hard copies that it may take them years to sell the first edition unless they actively market the product. This is where print to order self publishing comes in so that one does not carry stock.
There are other causes like poorly crafted or executed strategy and/business model management shortcomings, including inadequate financial controls, inexperience, and neglect. Most of these shortcomings can be mitigated by either attending courses or starting businesses with are franchised with a proven system. I highly recommend multilevel marketing systems as an entry into business that reduce failure rates of start ups.
Here is to wishing you all the success! Meet you at the top.