How to Prevent Business Failure

Thinking of opening a small business? Do you wish to learn how to prevent business failure?

Dealing with business failure is one of the most critical stages for business owners. Building a business requires a lot of time, money, and energy. No business owner will love to put their best into a business only to experience business failure.

The rate of business failures from Africa to Europe is overwhelming.

According to reports drawn by the Small business Administration (SBA), the survival rate of small businesses in the USA from 2008 to 2018 was at 78.7%. These statistics indicate that one-third of small businesses started growing through business failure and survived after 10 years.

The failure and closure of startups keep growing as the year advances. Sometimes, the amount of risk taken to set up a business does not equate to the results gotten. 

This should bother every intending business owner. I believe by now, you have a lot of questions running through your mind. What can an entrepreneur do to avoid failure? How do you prevent the market for your business from collapsing? How can we overcome and prevent business failure?

Dealing with business failure? This article will offer you practical tips that will help you learn how to prevent business failure.

However, before we dive into understanding how to prevent business failure, we must understand minor factors that cause business failure. This will help you draft a personalized plan to prevent business failure.

Four factors why businesses fail

1. Poor market demand

Sales and customers make up the foundation for a successful business. A business with no customers or low visibility is bound to close if care is not taken. This comes from citing a business on a market with no prospects or a market too small for expansion.

Startups must analyze the market demand of their proposed niche market.

2. Poor Business management

A business poorly managed will fail. This might occur when there is an unstable business structure or business heads. Business management skills are essential values for every successful business. 

Successful management skills include; financing, purchases, recruitment, salary structure, and work ethics. A business that fails to get this right is bound to fail.

3. Low funding

One of the most common mistakes that business owners make is starting a big business without adequate funding. It becomes very difficult to pump in enough funds to keep the business running. 

For a business to succeed there should be enough capital to fund its activities. This includes; digital marketing, unforeseen costs, and speculated costs for purchases and expenses.

4. Business location

The location of your business can affect your success. If your business is in a region without customer engagement, it won’t be long before you go bankrupt. These days, most startups built their business to function as a remote organization. 

You might decide to build your business as a remote structure that will give you access to all parts of the world with access to the internet. However, it is also important that you know who your target audience is and how you can reach them.

However, there are solutions to business failure and quick steps to avoid/prevent business failure.

1. Proper Financial management

Minor issues like managing your cash flow can pose big challenges to your business. You must be thoroughly trained with advanced financial planning skills. 

To overcome and prevent business failure, you must be accountable. Each penny spent on your business must be accounted for. Prevent business failures by learning to draw a clear line between your revenue and expenditure. You must also learn to draw a stable balance.

2. Have a clear, strong, and feasible business plan

The role of financial planning cannot be underestimated. If you fail to plan well for your business, your business is heading for doom. A business plan helps you have a clear picture of what you want to achieve. This serves as a detailed guide to success, gradually eliminating confusing steps that will compound as a failure.

3. Avoid getting into debts

Do you want to learn how to prevent your business from collapsing? Avoid debts and uncleared loans. While it is true that startups need many funds to start. 

The need for heavy funding might need a business owner to take loans and get into debt. Loans could serve as a quick means of raising enough capital to build your business. 

However, it is also a double-edged sword that will soon cut through your business. I wish it will be possible, I’ll advise all small business owners to avoid debts. Instead of going for loans, opt for investors that will invest in your business.

4. Learn the competition, the strategy, and your competitors

Do you want to stay ahead of the competition? Know who your competitors are. Competition is always so high for small businesses. 

It becomes a big tussle trying to beat big brands in the game. If you want to prevent business failure, you must take out enough to know your competitors and their winning strategy. What are they doing better than you are not? How are they converting their audience to clients? Understand the little things that they do and use them to replicate a business strategy that works for you.

5. Improve your customer service

One of the silent factors that run businesses down is a bad review. You must work on maintaining your client base, gaining loyal fans, and strengthening your service. You can do this by maintaining a cordial relationship with your clients. Improving your customer service can include the following.

  • Offering value-added service
  • Discounts and promotional offers
  • Loyalty campaigns
  • Referral programs

Your clients will be happy to relate with you if you give them reasons to do so. Build your business to focus on meeting customers’ needs and offering solutions.


Learning to prevent business failure is not a quick process to fulfill. All establishments are structured upon different business models. You must understand your business structure, and plot a business strategy for growth. Business failure is the fear of every business owner, with a good strategy you will eliminate failures.

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