3 Reasons Why New Businesses Fail and How to Avoid Them

If you are ready to know and avoid the 3 reasons why new businesses fail in their first year of business, then you are in the right place. 

Let’s dive in. 

1. New businesses fail because you don’t have a business, you just have an idea 

The problem that new entrepreneurs have is that they start with a business idea that they think is amazing. How is this a problem I hear you ask, seeing as this is where the process should start from, but the problem arises when they go straight from the ‘amazing idea’ to starting their business on the premise that they believe their idea is the best thing since sliced bread. 

The issue here is that they fail to think about validating their business idea and the unfortunate inevitability of not doing this, is one of the reasons why new businesses fail.

How to avoid this mistake

So, how can you avoid this major fail and set your business up for success? You need to carry out market research and all I mean by that is simply to speak to people.  If you don’t want your business to fail then you have to speak to the people who will pay for your product or service in order to make sure that what you are going to offer (your amazing business idea), is something that people actually want and will pay you for.

reasons why new businesses fail

You can speak to people by just calling them, sending out surveys or asking your followers/subscribers questions on your social media platforms. The idea is to go out there and ask the people you want to serve if the product or service you are offering will help them solve a problem they are facing, and if they are willing to pay for that solution.  

2. You don’t understand your customer, that’s why the business will fail

As much as new entrepreneurs want their business to serve everybody, these new businesses tend to fail because they don’t actually understand who it is that they are trying to serve and what it is they are actually selling. To put it in another way, they don’t know whose problem they are solving with their product or service. So, what do I mean by that? 

Let me give you an example 

Think about it, if you have a business selling lipstick, you may automatically think your customers are females. If you do, then this just tells me that you still don’t understand your product and as a result, you are not clear about who your customers are. Why? Well because what you are selling isn’t the lipstick itself but rather the transformation that comes about from using the lipstick. So what you are in fact selling is the idea of beauty, which can be broken down even further to depending on shades, ethical practices, current beauty trends etc, you get the idea.

Whoever understands the customer best wins

Mike Gospe

So, depending on what it is you are selling, you need to know who it is you are selling to, for example, if the lipstick range is vegan friendly, this goes beyond the scope of just selling to females, you now have a specific target audience to market and sell your lipstick to. You can now see how having clarity about what you are selling is important if you don’t want your business to fail. 

If you don’t understand the product or service you are trying to sell, you won’t understand who you are trying to sell to and frankly, you won’t make any sales. This is an equation for disaster.

How to avoid this mistake

The best way to avoid this mistake so that your business doesn’t fail is to make sure you understand what it is you are actually trying to sell.

People don’t by your products or service, they buy the solution you solve with your product or service

So, make sure you understand what problem or pain point you are trying to provide a solution for with your business idea and this will help you gain clarity about your offering and who it is you are trying to serve.

3. If you are not ready to be uncomfortable, the business will fail

Don’t get me wrong, being in your comfort zone is great, I mean we all have to start from somewhere. However one of the main reasons why new entrepreneurs fail is because they get stuck in their comfort zone but eventually, they will start wondering why their business isn’t growing.

reasons why new businesses fail

Well, the truth is this, if you are trying to do something that you have not done before, then you have to be ready to do something you have not done before (it’s ok, you can read that again 😊), because frankly when you step outside your comfort zone, that’s when the magic really happens. 

We have all been there 

Believe me, we have all been there, when you get to a point in your entrepreneurial journey and you find yourself saying “I don’t have a clue what I am doing”, or “I haven’t done this before”. Truth be told, it’s not going to be the first or last time that this will happen but what you have to do is simply embrace it. You have to start getting comfortable with being uncomfortable because this is what will allow you to seize the opportunities that will come your way that will help you to grow your business.

Of course, there are other obstacles that will come up whilst on your entrepreneurial journey, like the 3 common obstacles stopping you from your success, but if you don’t learn how to come out of your comfort zone once in a while, you will not see growth in your business.

How to avoid this mistake

So, let’s get you over the final hurdle of the 3 reasons why businesses fail so you can set yourself up for success.  When faced with an uncomfortable business situation, don’t avoid it. Acknowledge it and try to understand why it is uncomfortable for you. Thnk about what are you telling yourself about the situation that makes you think it is uncomfortable?

Is what you are telling yourself actually true or do you just need to develop more skills and understanding in a particular area. The main thing is not to run the other way but rather face it head-on or at least position yourself so it is in front of you whilst you ready yourself to take that leap 😊.

I do hope this post on the 3 reasons why new businesses fail has been helpful.

If you’d like to get more tips about business startups, feel free to join my private Facebook Group where I help you get clear and confident about your business and provide you more tips and strategies on how to grow your business. 

In the meantime make sure to comment below and let me know what your biggest takeaway has been from this post and I look forward to reading your feedback and hopefully answering some of your questions. 



  1. Pelumi
    January 5, 2021 / 6:08 pm

    Great Post. Thanks for sharing

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