Why do some small businesses fail?


Why do some small businesses fail?

Starting a small business is exciting and there are plenty of ideas out there just waiting to be turned into a reality. From changing the way people do business to finally transforming that market stall into a shopfront, the possibilities are endless when it comes to new business ventures. 

Having a good idea is just the start when it comes to the journey of opening your own small business. Executing it and keeping it successful is where the real challenge is, something that many SME’s unfortunately get wrong. 

If you’ve been playing around with the idea of starting your own business, we’ve got a few tips on what not to do when starting out. Our guide looks at some of the reasons why some businesses fail and what you can learn from these common mistakes. 

A failed plan 

It may seem like a basic one, but many businesses don’t take the time to properly plan for their business’ future. It’s good and well to be eager and wanting to make it all happen, but planning is one step that can’t be overlooked. 

Things to keep in mind when creating a business plan include: 

  • Clearly outline a description of your business. What is it that you do? 
  • What will be some of the future needs of your employees and management? Factor in money for things like extra staff wages and a bigger business premises for example 
  • Any opportunities and threats that may exist in the market and could potentially impact your business 
  • Capital needs- look at things like your projected cash flow and other budgets 
  • Details on how you plan to market your business and increase growth 
  • Knowing your competitors by doing a thorough analysis of them 


These are some of the fundamental things that you need to keep in mind when creating a business plan. Other things that you may need to also consider include: 

  • Ensuring that any sales prediction you include are based on market research 
  • Create realistic goals that are in line your industry average 
  • Correctly calculate the estimated amount of capital that your business will require.  


Not understanding risk management 

There are many things that you need to assess and keep in mind when it comes to keeping your business safe and secure. There’s a combination of risks that you need to be aware of that can impact the sustainability of your business. Being a step ahead of the game by preparing and being on top of these risks helps put your business in a strong position to survive. 

Some of the areas of your business that you may need to think about include things like the environment, resources and processes that need to be properly managed to keep your business running smoothly. 

Identifying any potential risks which may cause harm to your business before they become an issue is something which could save your business from facing disaster. Proper risk management once again involves having some sort of plan and process in place to manage it if something were to happen. 

Different businesses will be exposed to various kinds of risks, but some of the typical kinds of risks include: 

  • Security threats to the physical business premises 
  • Staff fraud and theft 
  • Natural disasters  
  • Negligent act and omissions in the provision of your professional services or advice 
  • Cyber crime 


Take a moment to consider the impact that a claim may have upon your business. Not only do you have to worry about the financial implications but there’s the possible damage that it may cause to your business’ reputation too. Without the right business insurances in place, a claim could cause you to shut up business for good, something no small business owner wants to be faced with.  

That’s where business insurance can help by providing protection against a variety of risks that your business is exposed to. Whether you’re an accountant working from home or running a small factory, there is a variety of different types of cover that can help safeguard your hard-earned business. 

Some of the typical types of business insurance option you may like to consider include: 


It’s a good idea to consider the various business insurance options available to cover your business. What may cost a few dollars now could help prevent your business from closing down in the future. 

Lack of homework 

 For many small business owners, not doing the hard yards of research and homework before venturing out can be a  reason for why their businesses have failed. Before rushing in, really take the time to test and develop your products and services before taking them to market. The last thing you want is a bad reputation before you’ve even started. 

Invest in researching, understand the market and how your product or service is going to provide a solution to your customers needs. Get familiar with your competitors too and have a good understanding of what their product offerings are. You want your business to stand out from the crowd, so be clear about how your business is going to different from everyone else’s. 

Hiring the wrong people 

The people you hire to help run your business can help make or break it. A strong team works together, supports each other and gets the job done with little to no issues. You need to be able to trust that you are all on the same page when it comes to the goal of helping your business succeed. This is also where leadership skills can become invaluable when setting goals and communicating them to the business.  

Not hiring the right people can lead to a team that is unmotivated and not working together cohesively. This can lead to things like the simplest of tasks not being done correctly or done at all. It’s another area of your business that you don’t need to rush. Invest in the right people for the job and you’ll be helping your business stay in the game for the long run.  

Start your business journey the right way 

Now that you’ve got a bit of an insight into what not to do when starting a business, it’s time to focus on what you can do to make it happen. It’s a process that takes time, research, planning and the drive to succeed. From the start make sure you have a sense of direction and some goals in place. 

Whether it’s your staff, the location of your business or the supplier of your products, make sure you source your resources well. It’s all these little things that help keep the cogs of your business turning, something that you want to be doing for a long time into the future. 

At BizCover, the one thing we can do to help make your business dream a reality is provide hassle-free business insurance options to help protect your business from unwanted challenges. Visit us online or give us a call to receive multiple quotes from some of Australia’s leading insurers. Experience insurance made easy today. 




* This information is a general guide only and does not take into account your objectives, financial situation or needs As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this web page is general only and should not be relied upon as advice. 

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