According to the Small Business Administration (SBA), about 50% of small businesses fail within the first five years. The results of business activity is easy to measure as long as records are kept. Businesses that fail almost certainly have ultimately failed because they didn’t make enough money.
In this article, we’ll look at the most common reasons for failure, but what we are most interested in is whether those fact-based reasons hide missing personality traits that cause those reasons.
Most common reasons for small business failure
The most common reasons for failure include the following:
- Lack of planning. Many small business owners fail because they don’t have a clear plan for their business. They don’t know what they want to achieve, how they’re going to achieve it, or how they’re going to measure their success.
- Lack of funding. Starting and running a business takes money. Many small business owners don’t have enough money to cover their startup costs, operating expenses, and unexpected expenses.
- Lack of experience. Many small business owners lack the experience and skills necessary to run a successful business. They may not know how to market their product or service, how to manage their finances, or how to deal with employees.
- Lack of market research. Many small business owners fail because they don’t do enough market research. They don’t know who their target market is, what their needs are, or how to reach them.
- Competition. The small business market is very competitive. Many small businesses fail because they can’t compete with larger, more established businesses.
- Poor management: Poor management is another common reason for small business failure. This can include things like making poor financial decisions, not having a clear business plan, or not being able to effectively manage employees.
- Economic conditions: Economic downturns can make it difficult for small businesses to survive.
- Personal problems: The owner’s personal problems, such as illness, divorce, or death, can also lead to business failure.
All of the above are valid reasons for a business to fail, are some of them avoidable? Of course, we can’t predict economic twists and turns such as those that have made business unpredictable since COVID and personal problems and health crises can strike without notice.
It’s fair to say that the top six can be planned for, and if proper due diligence was completed, many businesses wouldn’t open in the first place.
Build it, and they will come
I’m going to venture a theory that there is one main reason for the high number of businesses that fail, and that is that hope overrides every other doubt. Most small business owners start with the belief that if they start the business, the customers will come. They won’t! It takes a lot to market a business and ensure a continual flow of new enquiries.
Of course, it depends on what type of business you have and what you want to achieve. There are many tradesmen and small businesses that survive on word of mouth but it can be a feast and famine existence, never knowing where the next order is coming from.
What personality traits does a business owner need?
The premise of SPARK Principles for Success is that knowledge is not enough. This applies to almost all fields of work. It doesn’t matter how much you know; you will need other personality traits to make use of that knowledge. For example, if you have started your business because you were providing a trade for another company and decided to start out on your own, did you consider the differences between the two roles?
Business owners need to be highly self-motivated and driven, as they are responsible for every aspect of their business. There are no colleagues or managers to provide encouragement or direction, so it is up to the solopreneur to set their own goals and push themselves to achieve them. When you work for someone else, they set the work, and you turn up at the appointed time and get the job done. If you are not self-motivated, every aspect of your business will suffer.
Think about all of the steps that are required in the job.
Acquiring the customer – Marketing, sales, sourcing, ordering, hiring help, project management, communicating with the customer, completing the order, getting paid, chasing payment if you’re not paid and dealing with problems. You will need to do all of these things while trying to buld your business. Previously, the company may have had people to fulfil all these roles so you only had to concentrate on your job.
Being a business owner often requires thinking outside the box and coming up with creative solutions to problems. Successful business owners are able to tap into their creativity and use it to develop innovative products or services, as well as marketing and branding strategies. They have to do this even when things are tough. There is no burying your head in the sand if you want to survive as a business owner.
Successful business owners are able to adapt to changing circumstances and quickly pivot their business strategy if needed. They are comfortable with taking risks and trying new things and are not afraid to fail. They also have the ability to learn from their mistakes and make adjustments to improve their business.
Business owners need to have a high level of discipline and self-control in order to manage their time effectively and stay focused on their goals. They must be able to prioritise their tasks and avoid distractions, as there is no one else to hold them accountable for their productivity.
As an independent business owner, you may face numerous challenges and setbacks along the way, such as financial difficulties, competition, or personal issues. Successful entrepreneurs have the ability to bounce back from these challenges and keep moving forward, even when things get tough.
Running a business can be lonely, and you’ll find it difficult to talk to other people. You won’t want to worry loved ones with your concerns, and you’ll soon find that friends and family have so many different opinions that you stop talking to them about business.
Independence is a critical trait for entrepreneurs, as they are responsible for all aspects of their business, from marketing and sales to financial management and operations. Business owners must be able to work alone and make decisions without the input or guidance of others. They must have confidence in their abilities and be willing to take risks and make tough choices, knowing that the success or failure of their business rests solely on their shoulders.
Being independent also means taking ownership of one’s successes and failures. Business owners cannot rely on others to carry the weight of their business and must be willing to take responsibility for the outcomes of their decisions. This can be a difficult mindset to adopt, as it requires a willingness to face criticism and learn from mistakes. However, it is essential for solopreneurs to be able to reflect on their actions and take accountability for their outcomes, both positive and negative.
Furthermore, independence allows solopreneurs to be nimble and flexible in their decision-making. They are not beholden to the input or approval of others and can make changes or pivot their business strategy quickly and efficiently. This ability to adapt and make decisions independently is crucial in today’s fast-paced business environment, where agility and responsiveness are key to staying competitive and relevant.
Passion is a critical trait for business owners because it is what drives them to take the leap into entrepreneurship in the first place. When someone is passionate about something, they are more likely to pursue it with enthusiasm, persistence, and dedication. In the context of solopreneurship, this means being willing to work long hours, take on new challenges, and make sacrifices in pursuit of their vision.
Passion also gives business owners a sense of purpose and direction. When they are deeply committed to their business, they are more likely to have a clear understanding of their goals, values, and mission. This clarity allows them to make decisions that are aligned with their vision and purpose and to stay focused on the things that truly matter.
Maintaining passion can be challenging for solopreneurs, particularly when faced with obstacles and setbacks. When things don’t go as planned or when unexpected challenges arise, it can be easy to become discouraged and lose the drive and enthusiasm that fueled their initial passion. This is particularly true for solopreneurs who are often working alone and don’t have the support of a team to help them navigate difficult situations.
In addition to the stress of dealing with unexpected challenges, solopreneurs may also struggle with anxiety and self-doubt. They may worry about whether they are making the right decisions or whether they are on the right path. This anxiety can be a major obstacle to maintaining passion, as it can distract solopreneurs from their goals and drain their energy and motivation.
To keep their passion alive in the face of difficulty, business owners must be intentional about managing their stress and anxiety. This may involve developing self-care practices such as mindfulness meditation, exercise, or time spent in nature. It may also involve seeking out support from friends, family members, or a mentor who can provide guidance and encouragement.
Another key strategy for maintaining passion is to stay connected to the purpose and mission of the business. Solopreneurs should regularly revisit their goals and values and remind themselves of why they started their businesses in the first place. By staying focused on the bigger picture, solopreneurs can stay motivated and committed even when faced with setbacks and challenges.
This sounds negative, but if you want to succeed, it’s best to heed the warning and be sure of the skills and personality traits that you possess before you start. If you know what you bring to the business, you may be able to adapt your plan to include an employee who has the skills that you do not.