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7 Reasons Why Most Businesses Fail in their First Month

7 Reasons Why Most Businesses Fail in their First Month


For startups, success is never guaranteed. You will be surprised to read the statistics about failure. The Small Business Administration says that 1/5th of the business startups fail during their first year. If you haven’t planned things out well, you can actually fail in the first month.

It doesn’t necessarily have to do anything with the niche. Your business could be related to CFD stock trading or it could be an innovative venture. The chances of failure, in any case, can be equally high.

The million dollar question is, why? Why do businesses fail? We have narrowed down 7 top causes of failure.

#1: Lack of Customer Dialogue 

The worst thing an entrepreneur can do is to start a venture without understanding their customers. To actually succeed, you must walk in your customers’ shoes for 1000 miles.

Your customer has the key to your success. Lack of customer dialogue means you haven’t truly identified what your customers want. Why not talk to them now and figure out their needs instead of talking to them after spending thousands of dollars?

#2: No or Little Market Research 

It’s a huge blunder to start a business without market evaluation but a lot of businesses are guilty of it. Starting a particular business just because it is your passion is not the right approach. For instance, you cannot blindly open a real estate agency especially when the market is oversaturated.

It will be extremely difficult for you to compete with competitors who already have customers in the market. The only way you can make your venture successful is if you perform an in-depth market analysis to find an underserviced market. It will then be a lot easier for you to work your way through.

#3: Insufficient Capital 

Insufficient operating capital is another cause of failure. Often, new businesses don’t understand cash flow needs. They also end up underestimating how much capital is necessary to start the business. Then, some newbies have unrealistic expectations regarding revenue from sales.

It is crucial to understand that you will always need capital to stay in business. It may take a year or so for your business to actually start making money. Until that happens, you must have enough funds to cover the operating costs.

#4: Wrong Location

A bad location can be disastrous for your business. And what’s the point of having a business located where nobody comes to shop? When choosing a location, there are certain factors you need to consider; such as, where your customers are, location of your competitors, traffic, warehousing, storage needs, community flavor, etc.

#5: No Website or Social Media Presence 

In digital times like today, a website and a social media presence is a must. You need to make yourself accessible to Internet users. Even if you won’t be directly selling your services from a website, an online presence is still necessary. If you don’t, you will lose business to your competitors. With a website, at the very least, you will be able to tell your customers who you are and how you can benefit them.

#6: No Risk Taking

Business is all about risk taking. If you fear that, you will never succeed. This is applicable in real life, too. Some first-time entrepreneurs lack confidence and since they don’t have enough experience, they are not very good with risk-taking.

It is not appropriate to risk everything. However, when risk-taking can set you apart from your competitors or put you on the route of success then you shouldn’t hold back.

#7: Poor Management 

Effective management practices play a big role in success. Along with these best practices, great leaders are responsible for success too. But when the top management is confused and involved in poor decision making, then your business will eventually doom. Vices like conflicts, poor employee morale, low productivity, and low job satisfaction are born.

The domino effect of all this can be extremely catastrophic. The ones in the top management often don’t know how to run the organization. The mistakes they make can be fatal for the entire business. As an entrepreneur, if you assume that your past experience as a department head, engineer or team lead would be enough to run the business, you are wrong.

But how does an entrepreneur who has no past experience of running a business can protect his business from failure? It happens when you create a strong and dynamic team. A single person can never run a business. It will always be dependent upon different people with a different skillset. Yes, you are going to need external help.

Final Words

So long as you keep these common causes of failure in mind, you wouldn’t let them affect the success of your business. Failure isn’t all bad. It is through failure that we are likely to thrive. It’s a strategy most traders use in live trading.

If they fail, they document the failure to make sure they don’t repeat the same mistakes. Then, they come up with another strategy to achieve their targets. So embrace failure. It will take you one step closer to realizing your entrepreneurial dreams if you learn from it.


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