5 Reasons Many Businesses Fail in the First Year

Thousands and thousands of new businesses startup every year, and many of them do not even make it...

Thousands and thousands of new businesses startup every year, and many of them do not even make it through their first year. There are many reasons that businesses fail all of the time, and they can range from bad products to bad management.
Some people that have been successful in business do not always become successful on their first try, sometimes you have to live and learn and a failed business venture will help you learn what not to do if you plan on starting another business.
If it is your first time business venture then you should take a good look at failed and successful business models, this will help you understand some of the things that work and other things that do not work.

5 Reasons Many Businesses Fail in the First Year

Image Credit: DreamsTime

Lack of Experience

Lack of experience at running a business is one of the big reasons many new start-ups fail within the first year or two. Just because you do not have a lot of experience does not automatically mean that your business will be a failure, but knowing this is a big reason for business failure should motivate you to learn the ins and outs before jumping in head first.

There are plenty of places you can learn what needs to be done, you can research online and find advice and stories that will help you gain some insight into running a business. Another thing you can do is ask someone you may know that runs their own business, pick their brains for a while and allow them to be a mentor to you. This will increase your chances of making your business a success after the first year and for many years into the future. Knowledge is key, so learn everything you can before making the jump, and don’t let lack of experience keep you down!

Bad Management

Bad management is another of the main reasons that many new businesses fail, some can say this is due to lack of experience and that could be true in many cases, but not all of them. There have been many people that have started new businesses that had plenty of experience but because of bad management choices the business fell flat on their faces. Bad management can take many forms; one of these could be bad management of finances which can cause a business to go downhill really fast.

This is one of the reasons it is a good idea to hire an accountant to help manage the financial part of any business, someone that knows what they are doing can help eliminate the business failing because of bad money management. Another example of bad management is hiring people to run the business for you and not paying attention at all to what is going on.

Some people think they can just start a business and hire people to let them run it right from the get go, but In most cases this is just setting yourself up for failure. If you do hire people to manage and help run the business you should still always know what is going on, plus you need to trust the people you have running your business. Monitoring every aspect of your business will ensure that things go well and it is the only way to do it as a startup.

Lack of Planning

Sometimes people have all of the right intentions when starting a business, but many times people get anxious and excited and start the business right up with little or no planning. Having a business plan laid out before you launch is key, and this is extremely important if you are looking to get some help funding the business at the start up.

When you are trying to get a loan to launch your company almost all banks want to see your business plan, so this is the first thing anyone should do when starting a new business endeavor. Lack of planning can hurt in many other ways as well, another example is not having enough products to meet the possible demand you may encounter.

Thinking everything through beforehand is a must, as well as knowing what you need to start off successfully. There are many organizations that can assist you in starting a business for the first time, and seeking out one of these types of organizations to help you get going can be a big help and will definitely make sure you have planned everything out so your business has a great chance of being a success.


Location can be extremely important when you are starting a new business, you could have an amazing business idea and a great building but if your location is somewhere that people will not find it easily it could turn out bad for you. It is good to find a place where many people will see your place of business so you will get walk ins and people coming by to check out what you have to offer.

Sometimes even a struggling business can pull it together and survive if they have the right location, and on the other hand, you could have a great store or other type of business that is amazing but if it is not in a good location the business will most likely fail no matter how good it is. When starting your business try to find a location where there is potential for a lot of people to see it, this will help more than you can imagine and will be the key to your success.

Starting a Business for the Wrong Reasons

There are many people that start their businesses because what they offer is something they are very passionate about, and then there are also many people that will start up any business that they think can make them a lot of money. If you plan on starting a business make sure you are starting something that you have a strong interest in, because if you are not going into something you love your chances for success are very low.

If you are not passionate about what you do other people will see that and in many cases customers will find another company that does the same thing but is run by someone who really cares and knows all about their products and services. People that only want to make money with a business tend to only bother learning a little about what they are selling, but in order to be successful you need to know EVERYTHING about what you are doing, and there will be many questions from potential customers that you need to be able to answer.

If you cant answer the questions or do not have the experience people will just go somewhere else. So if you are starting a new company make sure you love what you will be doing, otherwise you will most likely  fail in under a year.

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