Top 6 Reasons Why Businesses Fail in the First Few Months

Entrepreneurs are rightfully venerated in our society. They become big-time philanthropists and pillars of the community in small towns. They help you get stuff and go places. They mostly fail within a year.

That’s right, a study by SBA says over a quarter of people who start a new business will close it within a year. Within two years, half of the businesses close.

Here’s why they do that.

Wrong Location

If you know something about the retail industry, it’s probably that location is everything. It is the key to having any profits since most retail operations work on razor-thin margins.

When you have to pay so many bills and wages to keep running, every customer counts. If you pick a street with too little people walking by, or the one with a competitor next door, you risk losing money.

Many young entrepreneurs are so eager to start they don’t spend enough time doing their research. This may lead to bankruptcy.

Short Budget

The problem with money in business is that there’s never enough. This may not be true for a huge corporation like Google, but for a recently opened cafe, it’s the question of life and death.

If that’s the first business you start, the odds are you’re going to underestimate costs and overestimate profits. Marketing budget rises, while the initial sales do not show half the figures you wanted.

This is one of the main reasons fresh businesses are forced to close. They just don’t have enough money to make it through the first half a year.

So, if you’re planning your budget, multiply all the spending by two. You may be lucky enough to get by without this, but such planning makes your business much safer.

Stubborn Vision

What many companies suffer from is a lack of understanding of how plans work. Some people seem preoccupied with their plan to the point of obsessing with it.

Sure, it’s easier to pretend like all is going just as planned than to look at your work with a critical eye. The problem is far too many entrepreneurs see a company as their child, not as an enterprise.

A child is hard to criticize. An enterprise is not. It’s just a way of making money, and you have to make it as efficient as possible. Adjust the plans you’ve developed to the economic realities you are experiencing.

Bad Bookkeeping

The sad truth behind every business is that it’s much more than a thing you want it to be. Whether you wanted to become your own boss, find meaning in life by helping others, or change the world, there’s one more thing to count.

It’s a boring reality of business. Bookkeeping. It’s not something you ever dreamt of when you were thinking about your business, but it’s crucial. Without it, you can lose your business pretty quick as you don’t know why you can’t make your ends meet.

So you have to either learn bookkeeping or hire help, just like you buy essays online cheap in college. It costs a lot, but it’s worth the money.

Employee Problems

Hiring the right people and managing them was never easy. The thing is you have to balance between price and quality all the time. If you’re just starting out, you may not be in the position to hire the best the market can offer. On the other hand, hiring the cheapest labor is a path that will lead you nowhere.

If you hire incompetent people who are not looking for long-term employment, they’re going to leave before you can teach them anything. If you’re hiring super competent people, your company may become entirely dependent on them. Once they leave, you’re out of business.

It all boils down to your leadership. If you can’t find and nurture talent, if you can’t make employees stay, if you can’t motivate people — your business is set to fail.

Customer Research

Do you know who your customers are? If you don’t, you will probably end up among the 25% business to close within a year of operation.

Prior and ongoing crucial research is one of the key components of long-term success. Sure, you can’t study your customers if you don’t have any. Start by studying what a typical customer in your niche looks like. What they like, where they go, how they buy.

Knowing this will help you create a stable business plan. Once you’ve started, study your actual customers. Doing this helps you adjust to the customer base and stay in business.

If you’re a B2B company, it’s even more important to you. There may only be a couple of key customers you need to secure a deal with to prosper.


While this factor is out of your control, you still have to keep an eye on it. Metropolitan areas like NYC are flooded with regulations that are very hard to navigate. Many small business owners overlook them and think that if they go by common sense, everything should be alright.

Unfortunately, some laws are counter-intuitive. One man served 8 years for selling lobsters in the wrong packaging. You may avoid jail time, but you won’t escape fines if you don’t know your regulations.

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