how do business plans fail

8 Reasons Business Plans Fail That No One Wants to Talk About

Danielle Hendricks

7 min. read

Updated October 27, 2023

As a full-time editor and academic mentor at an academic writing service, I have read hundreds of business plans over the years. To help students and startups, I have compiled a list of reasons business plans are rejected or given a low grade.

Of course, there are obvious reasons that business plans fail. For example, missing crucial deadlines for finishing the business plan, or drawing hockey stick profit projections can repel potential investors.

However, there are also less nuanced and more subtle reasons that investors and banks lose interest. These tips can help you avoid the minute and often overlooked mistakes that people make when writing a business plan. When investors and banks see hundreds of business plans every month, a small mistake can lead to a business plan being thrown in the rejection pile.

• The top 8 reasons business plans fail

1. Bad business ideas

Nobody likes to talk about it, but the main reason why business plans fail is bad ideas. Most ideas look great on paper—but all too often, companies realize they have invested in a bad idea once it is too late.

To avoid this, smart businesses are using “user-driven development” (UDD) to build new businesses. Lots of ideas seem great until you figure out that the market doesn’t actually want your product. In order to ensure that a business idea is sound, entrepreneurs should search for product validation by reaching out to their target consumers before sinking huge amounts of time and money into the project.

At Stanford University’s d-school , the designers use UDD to develop products that are user-centered. Firms that want to innovate with a focus on customers often hold small meetings with the potential end users where they describe the project and then ask users for their opinions.

After the first round of discussion, the firm can go back to the drawing board to incorporate the helpful feedback. Second and even third rounds can enhance the final product’s popularity. For example, The Embrace Warmer was created by asking mothers with premature babies what they disliked about traditional infant incubators in hospital maternity wards.

The mothers responded that not being able to hold their baby was the worst part of the experience. By focusing on the needs of the end-user, the developers of The Embrace—who were also students at Stanford—were able to create a highly demanded and successful business plan. Avoid wasting time on a bad business plan by gauging the market sentiment toward your project before investing a significant amount of time and effort.

2. Employee compensation is not incentive compatible

Business plans can fail because employees are not compensated in a way that aligns the goal of the employee with the goals of the company. In game theory, a contract is an incentive compatible if “every participant can achieve the best outcome to him/herself just by acting according to his/her true preferences” (Nisan and Roughgarden, 2007). For example, if an employee is paid with annual or monthly bonuses then the employee will only do what is good for the company in the short run.

In 2015, Forbes released a nice article on different salary packages for different company goals. One option is to offer tailored benefits to the employee. Startups and small businesses can offer more customized salary packages than large multinational corporations.

For example, instead of offering a standard salary package of retirement plans, child-care assistance, savings program, determine what the employee wants the most. For example, elderly employees may not be motivated by child-care assistance, so don’t focus on that in their package. Secondly, instead of offering an upfront payment of 2 percent of the company’s stock, offer a salary that pays that 2 percent over several years to ensure that the employee stays committed in the long-run.

3. No exit strategy for firing lazy co-founders

Anyone who has started a company knows that team conflicts are inevitable. A good business plan should have a step-by-step procedure for handling internal disputes. First of all, each co-founder should have a specific set of responsibilities with deadlines and consequences for failing to meet those deadlines.

Choosing the right co-founder is as important as choosing the right spouse. During the first few years, you may end up spending more time with the co-founder than anyone else. First, you have to know what are your own strengths and weaknesses. Try to find a partner that diversifies your skill set. Also, ask for references. Try to find out who they worked for previously, how they got along with their coworkers, and why they left.

Another way to help alleviate this problem is by delineating roles and delegating tasks. However, if a team member just does not have the time or the competence to achieve the goals specific to their role, then the company should have a polite but quick method for ending the relationship. Mentioning how these types of situations will be handled in the business plan is important because hurt feelings and vindictive ex-owners can damage the firm’s reputation and profitability.

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4. The team is not balanced

Another problem that I often notice on business plans is that the team is not balanced.

Company culture is an often underestimated challenge. I have read several business plans that present a compelling argument for a new product; however, the majority of plans fail to put together a team that has the competencies required to actually execute the business plan.

For example, I recently read a tech business plan that was making a health application for smartphones. However, the team did not have a single developer or IT specialist involved. If the business idea requires 80 percent of the labor hours to be performed by a software programmer, then the team needs at least one developer onboard. It is important to keep in mind that venture capitalists sometimes refuse to fund companies that only have one founder or have unbalanced teams.

5. Detailed financial projections are missing

The majority of business plans that I have been asked to edit have conveniently left out the balance sheet, cash flow statement, profit and loss statement, and income statement . The “numbers” are actually the most interesting part of the entire document for most investors. Break-even and return-on-investment (ROI) calculations are also parts of a good business plan.

My favorite tool for ensuring that I have decent estimations and great charts are the business calculators here on Bplans . Make sure to consider how legal costs and taxes will deduct from the bottom line.

Do not forget to factor in future expenses. For example, if the company needs to purchase new office equipment every three years, then the discounted value of those expenses should be included in the forecasted financial projections. Of course, the figures are only estimates, but they are important benchmarks that can be used to measure the company’s progress toward achieving their goals.

6. Spelling and grammar mistakes

Every time that I read a new business plan, my first step is to read each sentence out loud. In order to stop my mind from automatically filling in the correct spelling and grammar, I start by reading the last sentence on the page and working my way backward to the first sentence on the page. If you want to be 100 percent certain that there are no spelling errors, then consider hiring a professional editor to review your business plan.

Although some people think hiring a professional editor is “over the top,” the reality is that the most competitive firms have a professional editor review all of their documents for accuracy. If a bank or investor reads a business plan with typos, they will start to wonder if the entrepreneur is competent enough to run a successful business.

7. False assumptions

One of the final mistakes that students and startups make is falsely assuming the values of their investors and the values of their end-users, with some of the most common false assumptions being about their political or religious affiliation. This can be game over for successful companies, so startups should be especially careful.

Several examples exist of people that falsely assumed that their opinions were not controversial or were held by the majority. For example, Matt Harrigan, CEO of the startup Packetsled, stepped down after his comments about President Trump .

One piece of advice that my dad gave me can be helpful for writing business plans: “Opinions are like armpits. Everybody’s got them, and they all stink.”

The main point is that entrepreneurs and students who are writing a business plan should do their own research about the background of their potential investors and lenders. This ensures that you will have as much information as possible before pitching or handing over a business plan.

8. Failure to improve business plan after receiving feedback

Once you have finished writing your business plan, it is a good idea to send it out to at least three people before showing it to potential investors.

Think of these three people as your board of advisors. Ask them to read the plan and look for logical gaps in the content. If one advisor recommends a change that you disagree with, do not ignore his advice. Instead, ask the other advisors for their opinions and then make a decision. Edit your plan according to their constructive criticism, and thank them for their help.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Danielle Hendricks is an academic mentor at ACAD WRITE . In her free time, she is known for writing outgoing and funky pieces about the startup scene in Santa Fe, New Mexico.

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5 Reasons Strategy Execution Fails

• 21 Dec 2023

If your organization struggles to keep up in an increasingly competitive market, it’s not alone. Successfully executing transformative strategies is a challenge for many businesses.

The benefits of effective strategy execution are immense. According to a PwC survey , companies that invest more time and effort into strategy execution are three times more likely to report above-average growth and twice as likely to report above-average profits than those that don’t.

However, strategic plans don’t always succeed.

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Why Do Strategic Plans Fail?

Companies’ strategic plans often fail for the same reason: ineffective strategy execution. According to Harvard Business School Professor Robert Kaplan’s book, The Balanced Scorecard: Translating Strategy into Action , 90 percent of organizations fail to execute their strategies successfully.

“Studies have shown that execution is continually rated as one of the most significant challenges by executives,” says HBS Professor Robert Simons, who teaches the online course Strategy Execution .

For example, consider technology company IBM’s strategy execution mistakes . When personal computing became popular in the early 2000s, IBM managers continued to allocate resources to the business’s archaic aspects, like mainframes. As a result, IBM lost its industry standing once competitors began offering well-built, affordable PCs to consumers.

“There are many stories like this,” Simons says in Strategy Execution . “In each, we find a business strategy that was well formulated but poorly executed. And while you can find lots of advice on how to devise better strategies, there's very little guidance on how to execute those strategies.”

To help understand how to manage and implement strategy more effectively, here are five common reasons strategy execution fails.

1. Ineffective Resource Allocation

Resources are a powerful tool and provide the support to achieve strategic goals; businesses that fail to allocate them effectively rarely succeed.

For example, Circuit City was a successful electronics company that faced financial challenges caused by poor resource allocation. Instead of selling off risky business acquisitions , the company eliminated its most valuable resource: experienced sales staff. That decision proved detrimental when the company lost its competitive edge in providing quality customer service and industry knowledge.

One way to avoid similar outcomes is by designing high-performing jobs and understanding what roles require more resources and funding.

“Job design is a critical part of strategy execution,” Simons says in Strategy Execution . “If individuals don't have the resources they need and aren’t accountable in the right way, they won’t be able to work to their potential.”

To ensure your organization’s jobs align with its business strategy , Simons recommends using the Job Design Optimization Tool (JDOT) , which enables you to design or test any job by analyzing its balance of demands and resources.

The JDOT helps determine the following aspects of job design:

• Span of control: The resources for which you’re given decision rights and held accountable for performance.
• Span of accountability: The range of trade-offs affecting the performance measures used to evaluate employees—defined in both financial and non-financial terms.
• Span of influence: How many people you must reach out to when attempting to influence others’ work.
• Span of support: The support you can expect from those in other organizational units.

In terms of resource allocation, be mindful of who on your team needs wider spans of control. Those employees should directly support your business objectives and aid in strategy execution.

2. Ineffective Risk Management

One of the most common reasons strategy execution fails is ineffective risk management . While external factors like emerging disruptive technologies and evolving customer needs can negatively impact business strategy, many companies forget to mitigate internal risks.

Consider the downfall of energy company Enron. Due to a lack of internal monitoring, the company misled investors and stakeholders about its financial health for years through fraudulent accounting practices .

Effective oversight can help prevent such situations, but leaders are often expected to monitor too many aspects of their businesses simultaneously.

One of the best ways to prevent what Simons calls “bad employee behavior” is through internal controls —policies and procedures designed to ensure reliable accounting information and safeguard company assets.

“Managers use internal controls to limit the opportunities employees have to expose the business to risk,” Simons says in Strategy Execution .

There are three types of internal controls:

• Structural safeguards: Ensure a clear definition of authority for individuals who handle assets and record accounting transactions (for example, segregation of duties).
• Systems safeguards: Assure procedures for processing transactions and management reports are adequate and timely (for example, database security).
• Staff safeguards: Make sure accounting and transaction processing staff have the right levels of expertise, training, and resources (for example, job rotation).

Leveraging internal controls like these can help mitigate internal risks that could hurt your strategy execution.

“There's a lot of opportunities if we start thinking about internal controls and what it's trying to prevent,” HBS Professor Eugene Soltes says in Strategy Execution .

In addition to mitigating financial risks, internal controls can influence your company’s long-term operational and financial performance by safeguarding strategy execution.

Related: What Are Business Ethics & Why Are They Important?

3. Vague Strategic Goals

A common mistake when implementing strategy is underestimating the power of business goals and objectives .

According to a study by The Economist Intelligence Unit , 90 percent of senior executives say they failed to reach all their strategic goals because of poor implementation.

One example of a company impacted by poor strategy implementation is Target. Although a successful retail company, it had difficulty expanding into the Canadian market due to management’s inability to effectively communicate strategic goals, operational procedures, and differences in customer expectations to Canadian employees. As a result, Target had to close all Canadian operations .

You can help avoid such outcomes by using tools like the balanced scorecard .

“The balanced scorecard combines the traditional financial perspective with additional perspectives that focus on customers, internal business processes, and learning and development,” Simons says in Strategy Execution . “These additional perspectives help businesses measure all the activities essential to creating value.”

When paired with a strategy map —an outline of the cause-and-effect relationships that underpin your strategy—a balanced scorecard provides a roadmap for understanding the relationship between your business’s goals, measurements, and value creation .

Remember to define and outline your goals and objectives before implementing your strategy to ensure consistency and alignment throughout the execution process.

4. Lack of Organizational Support

No matter how great your strategic initiatives are, you can’t implement them alone. Successful strategy execution requires the support of employees, stakeholders, and customers.

One situation that exemplifies why it’s vital to gain employee buy-in before implementing high-level changes is JCPenny’s failed 2011 rebranding strategy . Under new leadership, the company tried to implement a strategy focused on modernizing stores and pricing models, which was met with internal resistance. Longtime staff and sales associates felt disconnected from the new direction. Many employees also didn’t understand the pricing strategy and weren’t adequately trained in the company’s latest sales tactics.

One of the most effective ways to earn your team’s support is by communicating your company’s core values —your business’s larger purpose that inspires and guides employee behavior—and how it aligns with your strategy.

“You may think of them as little more than window dressing or ticking a box without much real impact on the business,” Simons says Strategy Execution . “But I've learned that the best companies—the ones that are most competitive and lead their industries decade after decade—put enormous emphasis on their core values and beliefs.”

Examples of core values include:

• Diversity and inclusion
• Sustainability

By aligning strategy with purpose, employees won’t just support your strategic initiatives but be engaged in their work .

Related: 6 Strategies for Engaging Your Employees

5. Imbalance of Innovation and Control

Innovation is essential to your organization’s long-term success. However, it’s critical that innovative products and services don’t hinder your business strategy’s execution.

For example, Uber has historically struggled with balancing innovation and internal controls. While the ride-hailing company has transformed the transportation industry, its need for innovation has led to several instances of misconduct due to insufficient internal controls . In response to public criticism and regulatory scrutiny, Uber has taken steps to address those issues and placed greater restrictions on what employees should and shouldn’t do.

You can help balance innovation and control by setting strategic boundaries , which define your business’s desired market position by identifying opportunities it should avoid and pursue.

You might be overwhelmed by such decisions. In choosing what to do and not do, you might worry about stalling innovation throughout your organization. However, restrictions are more guidelines than constraints. Instead, they should ensure innovation aligns with your business strategy’s direction.

How to Succeed in Strategy Execution

Strategy execution doesn’t need to be intimidating. While many businesses have failed to execute their strategic initiatives, you can help ensure yours succeed by developing strategy execution skills .

By taking an online strategy course , you can build the knowledge and skills to reach your strategic goals. Through an interactive learning experience, Strategy Execution allows you to learn from real-world business examples to better understand the strengths and weaknesses of your organization’s strategy execution approach.

Want to discover more tools you can use to implement strategy? Explore Strategy Execution —one of our online strategy courses —and download our free strategy e-book to continue learning about how to avoid common execution mistakes.

About the Author

Why do business plans fail?

Table of Contents

Bad product ideas

Poor partnerships , a lack of detail , unrealistic financial planning , how a simple app can help improve your business plan.

Unfortunately, not every business will be a success. The failure of businesses is usually due to some issue in their business plan, and there are hundreds of different issues a business plan could have.

This article will describe some of the most common reasons a business plan might fail and how you can avoid them. We’ll look at common pitfalls such as:

• Poor partnerships
• A lack of detail
• Unrealistic financial planning

Sometimes, a business plan fails simply because it focuses on bad product ideas. A bad product idea means that the product or service your business specialises in does not sell well, and the lack of sales leads to an income problem for your business.

Business plans containing bad product ideas usually come about due to a misunderstanding of the term ‘ unique selling point ’. A unique selling point is what makes your product stand out from the products of the competition. It’s a feature that makes the product better as well as being unique. 

Many bad product ideas come from individuals that focus too much on the ‘unique’ part of the term unique selling point. While it is important to have a different product from anything else on the market, make sure you also know what your customers want from a product .

While it’s nice to have help running your business, it’s important to find the right person for the job before you write a contract for a business partnership . If you create a business plan as a partnership and your partner fails to fulfil their responsibilities, your business will struggle to succeed.

There are three things you may want to consider if you’re trying to avoid poor partnerships. The first is your partner’s skill set: look for someone with talents related to your business idea as well as talents you don’t possess. It’s helpful to have a diverse collection of skills within your business. 

Secondly, make sure your potential partner is as passionate about the business as you are. If they aren’t, you may find that you end up doing most of the work or that they leave the business as soon as things become difficult. While measuring passion and emotional investment is challenging, finding a business partner that matches your feelings regarding your business plan is vital.

Finally, create an exit strategy. While you may have found a perfect business partner, you never know what difficulties you’ll encounter in the future. So make sure you know what to do if there is an internal conflict in your company that you can’t resolve peacefully.

When you write a business plan , you need to make sure that you plan for almost anything. One of the biggest reasons business plans fail is because they don’t account for certain situations.

It’s impossible to plan for truly unexpected problems, but a detailed business plan will account for most situations by listing off your company’s weaknesses during a SWOT analysis . SWOT stands for strengths, weaknesses, opportunities, and threats, and it’s a standard part of most business plans. 

By using SWOT to list weaknesses in your business plan and potential threats to your success, you can start planning ways to deal with problems. For instance, you might identify a lack of sales as a potential threat. To account for this, you could invest in marketing or reduce your prices. If your business plan doesn’t account for these sorts of situations, it increases its chances of failure. 

Another reason for lack of detail in a business plan is low-quality research or not performing research at all. Without researching the market and industry you operate in, you’ll struggle to learn about your competitors or understand your customers’ needs. Thorough research is an essential part of avoiding business plan failure.

Financial planning is essential in business. You might not know the future of your business, but with a decent financial plan, you’ll be able to avoid most obstacles to success. If your financial plan is poorly thought-out or unrealistic, though, it might not be as valuable.

Financial plans are all about mapping out your company’s growth. If you’re too optimistic about this growth, it can cause serious problems. Unrealistic expectations can cause unprepared businesses to go bankrupt very quickly.

For example, say you expect to be making £1,000 a week in sales revenue by your second week of business. Your financial plan relies on this for you to pay rent and buy supplies. If it gets to that week and you’re only making £500, you’ll not be able to pay the bills that allow your business to operate. 

To avoid these problems, try lowering your expectations. Even if you think you have a fantastic product idea, it’s better to prepare for the worst than plan for the best and run into trouble. If you create a conservative financial plan that expects some success but accounts for things like low sales, your business plan is much less likely to fail. 

One of the biggest parts of your business plan is the financial aspect. To create a business plan that’s unlikely to fail, you’ll need to make sure you have a good understanding of accounting and a way to track how you’re spending your money.

The Countingup app offers built-in accounting software with its business account so that you can manage all your financial data in one place. 

With additional features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here .

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Strategic Planning Failure: Why It Happens and How to Avoid It

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There are more than  30 million small businesses  in the U.S. If I asked you to divide these companies into categories based on annual revenue, how many would fall into the $1-10 million revenue tier? How about $10-50 million or above $50 million?

These businesses comprise only about 4% of those in the U.S. The remaining 96% have less than $1 million in annual revenue. Unfortunately, only a small number of them will grow into the next tier. In fact, it’s so hard to move between categories, there are only 17,000 businesses with more than $50 million in annual revenue. Only 17,000 out of more than 30 million!

It leads you to wonder — why do some companies struggle while others blast through the ceiling and achieve phenomenal growth? What are common barriers that prevent companies from achieving this level of growth? The secret often lies in strategic planning.

In this article:

Top 28 Fatal Strategic Planning Program Flaws 

How to overcome strategic planning failure.

• Start Executing Your Strategic Plan With AchieveIt 

For some companies, strategic planning seems to be a rhetorical exercise in which everyone fills out a form at the beginning of each year listing the things they are going to accomplish. The forms are assembled into a tidy document and updated quarterly. It’s all very task-oriented. And while, yes, strategic plans contain tasks, without goals, objectives, and strategies to provide context, the tasks are meaningless. A strategic plan without measurable objectives is no strategic plan at all. 

Successful strategic planning means business elements are working together agreeably to contribute to these goals. For strategic planning to be successful, you need to understand the factors that play a role in strategic plan failure. We’ve gathered a list of the top 28 reasons why strategic plans fail. 

1. Premature Upscaling

Pushing your business outside of its limit is known as premature upscaling and may occur if you are impatient to implement a business venture, project, or strategy. Preparing your team to take on any kind of expansion before anticipating possible consequences can lead to disaster. Managing the effectiveness of your strategic plan means not taking it  beyond the reality  of what your business can handle. 

A practical internal organization should focus on a steady upscale by defining specialized roles, strengthening management structure, planning, forecasting, and sustaining culture.

2. Poor Managerial Skills or Lack of Leadership

Managers and leaders can heavily influence productivity, revenue, innovation, and turnover. Management that contributes to a lack of trust or low expectations can decrease employees’ motivation or performance, which can affect strategic planning. Managers can assist in creating a proactive environment by learning from their failures and encouraging experimentation. Promoting open communication and exchange of ideas may also help with improvement opportunities. 

Managers should be aware that  employees may not always come to them  when problems arise, so anticipating problems and engaging with employees to create solutions for strategic plans lets your team know they are a priority. Having suitable leadership can ensure your team’s commitment and buy-in to the process.

3. Zero Succession Plan

Many strategic plans are not executed well because the business doesn’t have a succession plan. A succession plan ensures the necessary resources and skills are available when needed for a business plan or transition. The absence of succession planning may leave your business exposed to  inefficient replacement options  for positions that need to be filled, as well as fewer training and opportunities for your hard-working employees.

Businesses with a  strong succession plan  may see more resolved conflicts, effective decision-making and a boost in employees’ qualifications to take over specific roles. 

4. Overwhelming Strategic Plan

A strategic plan that is too overwhelming may be just as ineffective as having no plan at all. Too many vague goals or action steps — such as “growth” or “increased revenue” — can create confusion and dilute specific instructions or paths to accomplishment. This lack of precision could make employees  less likely to make progress  on goals. A strategic plan can also seem overwhelming if it aims to accomplish too many objectives at once, making it more difficult to translate them into useful measures. 

Creating a specific plan with goals and means of achieving them may reduce the likelihood of concerns or the need for clarification in the future. Using specific objectives can help you develop a reasonable timeline for intended success. It may also assist your employees in feeling confident in their respective roles and positions.

5. Unrealistic Goals: All Vision, No Direction

Setting unrealistic goals may explain why your business strategy fails. Unrealistic,  immeasurable, or unquantifiable  aspirations can be difficult to put into action and contribute to a lack of organizational focus because employees may find it unmanageable to meet the requirements. Employees are more motivated by challenging but attainable and incremental goals that align with business resources and productivity. 

Aside from envisioning your goals, you need a plan for implementing them. So, after ensuring all the essential elements of your mission are accounted for in your goals, develop a plan for implementing them. This ensures your plan has a focused vision and a sense of direction. 

6. Focus on Structural Changes

A business that puts too much focus on structural changes may lose the opportunity to direct its energy toward decision-making and meeting goals. Rather than building new structures, it is important to work on developing effective processes for strategies. Structural changes may bring about more issues and conflicts that take away attention and time from the strategies that can help your business succeed. 

There are often limits to structural changes in organizational design, as it can take a long time to get everyone on board with the process to run smoothly. 

7. Lack of Empowerment

The formulation and execution of your business strategy may depend heavily on your employee’s confidence and positive thinking. Empowered employees may feel more motivated to collaborate and achieve a goal, which can have a direct impact on your strategic planning success. Leaders who implement empowerment may see an increase in connection and creativity. Developing an inspiring and innovative environment can increase adaptation to different work styles, which may lead to success.

8. Wrong Timing

A solid business plan considers when the time is right to administer action. Your business strategy may be equipped with the proper resources, planning, goals, and actionable measures. But if the timing in your market or industry is not optimal, it may be wise to contemplate implementing it at a different time. The timing of your  project often directly relates to success , so finding the ideal moment to bring your plan to life is important. 

9. Short-Term Planning and Losing Sight of Goals

In the hustle of day-to-day operations, employees may easily lose sight of the mission. This attention can hinder short-term goal planning when your employees only focus on daily activities rather than their purpose in the overall goal. 

Before establishing your business strategy, think about the big picture and general direction of where you want to grow. If you don’t set long-term goals, you may lose the ability to envision sustainability. Setting long-term plans and objectives can improve your short-term goals’ structures because you may be able to  narrow the focus  toward what you are trying to achieve. 

Most of the time, your business’s short-term goals will be very different compared to its long-term strategy, so you and your team should revisit goals regularly to keep everyone on track. Planning for your business’s future and adapting your daily actions to your strategic plan’s goals can strengthen your employees’ ability to maintain a broader perspective. 

10. Choosing the Wrong People or Relying Too Much on External Consultants

In any business, the employees and team members are the most important asset. Every business strategy, plan, and execution stage requires different skills, personalities, and capabilities. Choosing the wrong people to fill specific roles in your business plan may decrease productive methods and success.

A team of  external consultants  is almost always a good idea for collaborating on a business plan and ensuring success because strategic management decisions can be very challenging. However, strictly relying on external consultants, meaning those who are not a part of your business, may lead you to lose sight of your business goals and purpose. After all, no one knows your business better than the people involved in your internal organization.

The external structure, also known as the environmental subsystem, should interconnect with the internal structure of your business to maintain consistency and work to improve intended progress. Internal consultants may be more beneficial for your business, depending on the size of your project or business plan. They may have a better idea of how to allocate resources and take a specific approach.

11. Lack of Communication or Lack of Clarity on Actions Required

When strategies fail, it is often because of a lack of communication. Communication keeps everyone on the same page. To communicate effectively, you must understand what information is relevant and important when notifying your team of updates, issues, or changes on a project. 

In businesses where a lack of communication contributes to the limitations of strategic planning, employees may feel confused about their roles and responsibilities. They may also feel disconnected when attempting to collaborate, which can lead to poor execution and confusion on context and outcomes. A method of storytelling can be effective in this case to put facts, strategies, missions, or  operational planning  directives into a structure that people can relate to and understand. 

Another crucial part of communication is accountability. Around  91% of employees  would say effective accountability implementation is one of their company’s top leadership development needs. Clearly communicating what employers are accountable for is essential, considering  60% of workers  report higher levels of mistrust with leadership when faced with a lack of communication surrounding accountability.

12. Inadequate Monitoring

Monitoring the development of planning and progress for any strategy can keep you aware of when changes need to be made. Determine which factors will have a significant impact on the success of your business to create a timeline of when critical tasks need to be completed. Proper monitoring allows for the opportunity to notice alternative solutions and predict long-term performance. Keeping your strategies and objectives on track may help prevent problems and enable you to revise or update plans as necessary. 

Monitoring your financial key performance indicators (KPIs) is another great way to be proactive and add value to your daily activities. 

13. No Progress Reporting

Reporting progress is another effective means of communication that contributes to staying on track with meeting your goals. A progress report updates the right people on the status of certain projects or task completion. Without it, there can be confusion and concern surrounding productivity. 

Progress reporting can also provide an overview of your team’s accomplishments and areas that need improvement. Constructing a regular analysis of your team’s performance, spending and profits can provide insight into how you compare with competitors. 

14. Lack of Alignment

Strategic alignment means that all crucial elements of a business are working together to support long-term goals. If employee performance is not aligned with your company goals and important strategic plans, it may present another obstacle to success. Misalignment in your business can create a disruption in focus, unclear goals, and conflicting tasks. 

Employees need to understand how their responsibilities fit into the success of a strategic plan or mission. Creating clear, established intentions may help you develop alignment with what your business aims to accomplish. 

15. Strategy You Can’t Execute

Before wasting time, energy, and resources on a strategic plan, consider if it is truly worth executing. Vague ideas or goals won’t usually produce anything successfully, so analyze your plan to see if it is capable of creating real change. Your strategy should be flexible and leave little opportunity for disruption. 

Your business may be too focused on seeing rapid results that it may not take the time to develop capabilities and innovation techniques. A worthy, solid strategy will take time to develop and may even require fundamental changes to your business. 

16. Unforeseen External Circumstances

Unpredictable occurrences should, ironically, be expected. If your company is not comfortable with confronting unforeseen external circumstances, it may explain why your strategies fail. Learning to anticipate risks or unfavorable opportunities can strengthen your ability to prepare a more secure strategy in the future. It is wise for your business to continually adapt its resources to suit a changing environment. 

Leaders and managers should devise a plan that highlights any uncertainties or possibilities for changing demands and competition to reduce the chance of failure from an external source.

17. Flawed Strategy

Implementing an incomplete or inconsistent plan is another possible reason why your strategic plans fail. A poor match between strategy and organizational  core competencies  may prevent you from seeing the growth and success that you desire. Testing your strategy with logic and a discernable vision can help determine if there are flaws in your strategy and how to address them.

Look to past situations and failures to see where you might notice defects in your current business strategies. You may jeopardize your business’s advancement if you rush to execute a strategy that hasn’t been well thought out.

18. Allowing Planning to Kill Strategy

The planning process allows you and your employees to demonstrate the goals you have in mind and how they can be achieved. However, too much planning — or too much focus on it — might dilute the importance of your strategy execution. At some point, you need to shift the overall focus to the strategy itself and how it will be executed to meet the desired growth.

Many managers and leaders may take too much time during the planning process trying to perfect every tiny detail. While this is admirable, it can also cause a delay in getting your anticipated results. Strategy execution should not be confused with planning, as they are completely different parts of the process of strategic analysis. Planning usually consists of an organized list of initiatives with associated budgets, resources, and deadlines. The strategy involves implementing specific decisions that lead to sustainable competitive and financial advantages.

19. Disorganized or Poorly Written Plan

A poorly designed plan will most likely lead to poor execution, which may cause strategic plan failure. Sufficient research and development of a plan with expertise and direction can be a part of the process of refining and organizing it. A jumble of to-do lists that are not coordinated and have no stated objectives may only cause your team to take longer to come up with a proper arrangement. This is also where accountability comes in — Ensure team members understand their responsibilities. 

20. Incremental Thinking

While incremental goals and growth may be a positive aspect of strategic planning, incremental thinking is usually not. This method of thinking usually consists of waiting for immediate, linear results and is generally unrealistic. It’s a more traditional process that may cause you to expect progress because you think you are making the right decisions.

Before implementing your business strategy, consider practicing an exponential mindset. Exponential thinking allows you to assess your growth in terms of its journey rather than overnight results. Exponential projections are not always certain and may not always meet your expectations as reliably as incremental thinking, but they  focus on working differently instead of working better . You can practice patience and alignment in your business, bringing about the opportunity for innovation.

21. Insufficient Focus

Another fatal flaw in strategic planning is insufficient focus. Employees who have too many widespread tasks may not know what to prioritize or what objectives are most relevant. Staying consistent with communication and reflecting on your business’s values and mission can be a helpful reminder that keeps team members on track.

Leadership may also focus too much on internal issues that don’t relate to their goals, such as resolving conflicts and sustaining performance. Too much internal attention can mean leaders fail to acknowledge competition markets and trends in technology. Focusing on the necessary elements of your strategic plan is key to maintaining the dynamic in your business, but  70% of leaders review their strategy  on an average of only one day a month. Spending too little time focusing on your prime concerns may lead to strategic failure.

22. Prioritizing the Wrong Things

While outlining specific priorities and goals is essential for strategic planning, it is crucial to prioritize the right things. Your priorities should directly align with your strategic business plan and have an obvious connection to how your company will succeed through particular steps and tasks. Explaining your priority objectives in detail and why they matter to your organization can help you understand if they truly are important.

It’s also normal for priorities to change throughout the process of implementing your strategic plan. Your goals may occasionally need to be restructured due to industry changes or financial impediments, so it’s a good idea to revisit your primary concerns regularly to see if they still match up with your current progress.

23. Insufficient Research

A lack of proper research may present problems down the line when executing your strategy. This type of research may include competitive industry markets, a review of your company’s resources or a look at your company’s financial performance. It is important to consider all possible elements of your strategic plan so you can better predict challenges and obstacles.

Strategic research planning can also be helpful to  define the resource and budget needs and possible outcomes before beginning a project. Leaders who prioritize research help ensure that all the important elements of a plan are accurately measured and completed. Emerging industry trends and changes can also be identified and updated according to your business plans with appropriate research. A lack of research could lead to a deficient comprehensive strategic plan because of failure to highlight related interactions, pressure points, and dependencies.

24. Putting Financials Ahead of Ideas

Improper use of resources is another factor in the list of fatal flaws. Tracking financial performance keeps you prepared for unexpected or unplanned events. However, being so concerned with your cash flow that you neglect ideas that could grow your business can cause you to pause your business plan or scrap it altogether.

Consistent poor cash flow management can also prevent you from making impactful decisions, finding resolutions, and predicting a prospective financial outlook for your business. It may also keep you from being able to participate in new business opportunities. Staying on track with your finances and managing them sensibly may make it easier for you to take on new tasks and projects without seeing a depletion of resources.

25. Failing to Make Trade-Offs

Strategies require making decisions that are difficult but necessary. Making trade-offs is very common and essential in most businesses and involves choosing one option or action over another. This ensures that your revenue, time, energy, and resources are going to the tasks where they can make the most impact.

For example, if your employees work toward many different, widespread goals or missions, there may not be much progress on your primary strategic plan. Failing to make trade-offs can prevent you from being able to allocate your resources to your most important key projects and objectives. Trade-offs also allow you to  determine which goals may conflict with each other , which risks you are willing to take, and which ones are not worth the possible loss.

26. Putting Too Much Value on Your Central Idea

Putting too much emphasis on one goal also has drawbacks. While it’s important that your team keeps your central idea or goal in mind, it should be flexible and adaptable. Having a backup plan can help add some security to your strategy and address concerns from your team.

It is also crucial to remember that strategies cannot be perfect, and leaders and managers can’t know every conceivable aspect of what may occur in the future. Putting all of your focus into one central idea will not give you much room to modify or adjust when issues arise or variables change.

27. Using Unrealistic Models

Setting unrealistic goals is another reason why strategic plans fail. Goals or models that seem unattainable may decrease motivation in your employees and slow productivity performance. Setting actionable, measurable goals can make your team feel like they can accomplish something while being challenged at the same time.

Your strategic planning models should be aligned with your intentions, but they should also be flexible. Your employees should be able to develop these ideas and results upfront and be equipped to face unexpected obstacles. Use common sense and intuition in the decision-making process to create realistic models and goals.

28. Failing to Link Strategic Planning to Strategic Execution

A solid strategy usually consists of adequate planning, organization, and delegation of tasks. To see success, you need to connect your strategic plan to your strategic execution. When managers or leaders become strictly reliant on their strategic plans, it may become more difficult to adapt to the external environment due to increased rigidity and inability to emphasize action.

Failing to link strategic planning to strategic execution may also decrease innovation. Innovation is a common link between strategy and performance, which may help you keep that connection when moving from the planning to the execution stage. Another part of this link may incorporate reviewing expected results and ensuring everyone stays engaged with the procedure and implementation process.

Combatting any obstacle can feel like a challenge, but it can also show you how to strengthen your abilities and become more successful. Seeing your plans develop may reinforce your feelings of accomplishment, making you more confident and secure in your future strategies. Here are a few methods on how to overcome strategic failure and improve overall problem-solving in your business.

1. Reflect on the Failure

The trial and error process is vital to learning, growth, and success. In business specifically, it’s normal to encounter failure, and it’s something you’ll have to accept. Think of failure as an opportunity to learn, recover, and shift your mindset to your next steps. 

Experiencing failure can supply you with the ability to become  stronger and more knowledgeable  throughout the entrepreneurial learning process. Research suggests that failure can give you a better lens for future-orientated learning outcomes. Applying and utilizing what you have learned from your past mistakes can help you generate an early warning system that allows you to anticipate ways to correct your actions.

2. Take Responsibility

As a leader, admitting you have made a mistake or could have done something better is not always easy. But owning up to the situation instead of blaming outside factors will make you appear more responsible. Being willing to embrace accountability rather than focusing on a victim mentality can make you more resilient in the future. 

Taking accountability may even  produce positive results , such as:

• Improved solutions.
• A boost in creativity.
• Employee commitment and participation.
• Employee morale and satisfaction.

If you struggle with taking responsibility, think about the impact it may have on your employees. Setting a good example and enforcing the importance of accountability will provide a more solution-oriented environment, especially in the wake of a strategic failure. 

3. Create Feedback Loops and Get Feedback

It’s not always easy to hear or accept feedback from your peers. However, the value of feedback proves to be quite the opposite. If you struggle to appreciate the feedback process, know it can be essential for learning and developing at any stage of your career. When you receive knowledge and opinions from others, it can help you think of a new perspective or idea you hadn’t previously considered. 

Creating an environment that encourages friendly but constructive criticism can have many benefits, including:

• Providing clarity for employees.
• Acknowledging the hard work and effort of others.
• Communicating what can be changed.
• Reinforcing and motivating employees with innovative ideas.
• Encouraging employees to review and adjust their goals.

Receiving advice should be seen as an opportunity to overcome areas of weakness. The Pendleton Model suggests that an action plan or specific goal  should be the top priority  when giving or receiving feedback. This model can refine the communication process — the more feedback you receive, the more you can think and reflect on the most efficient improvement methods. 

4. Use Your Support Network

Building connections with people who have different opinions and perspectives is a great way to feel supported and manage stress. A study revealed that  social support can improve psychological resilience when you are faced with stress, adversity, or failure. With a positive social support network around you, you may be less likely to:

• Engage in risk-taking behaviors.
• Feel socially isolated, which can lead to depression.
• Use or rely on negative coping mechanisms.
• Have negative thoughts about yourself or your abilities.

A team of motivational peers, friends, coworkers, or family members equips you with a sturdy structure for authenticity and encouragement. 

5. Recognize That Strategies and Plans Can Change

The willingness to accept change is also something that requires effort and patience. To improve the culture of your business, organization, or practice, you must be open to change. This concept may seem difficult to implement if you are used to a specific structure, direction, or position. However, change is almost always a perfect opportunity to enhance productivity and efficiency.

When approaching change, it’s a good idea to think of it as you and your team conquering a challenge or creating a vision together. Celebrating the small wins, maintaining a positive attitude and staying focused on your goals will make embracing new and intimidating changes easier.

Venturing out into a new strategy or business initiative may cause you to long for the comfort of predictability and the traditional way of doing things. But change can also make you feel more empowered, strengthening your ability to adapt to your environment and make more conscious choices. 

6. Manage Business Expenses

Staying on top of your business expenses can prevent you from dealing with financial problems in the future. Creating a  money management plan  can keep your payments and charges organized. Having control over your finances will save you time and energy that you can instead devote to your business strategy. Examples of managing your business expenses can include:

• Having a dependable payroll system.
• Hiring a reliable accountant to assess financial performance.
• Having an accounting or bookkeeping system.
• Regularly check your financial reports, such as income statements and balance sheets.
• Ensuring you are adhering to federal, state, and local tax regulations.
• Managing cash flow.

You will have one less thing to manage if your business expenses are handled by a credible, trustworthy professional. 

7. Create an Improved Execution Process

Learning from past mistakes is a powerful tool for improving your future plans and initiatives. Individuals often  resist change , which may present problems such as counterproductivity and ineffective job performance, which is why many strategy implementations fail. 

Once you decide on your next step toward a goal, following up with attentive communication and follow-through is essential to staying on top of a successful strategy. A few steps to  creating an improved execution process  may include:

• Identifying critical vulnerabilities.
• Communicating priorities and success factors.
• Creating an outside perspective of your business.
• Considering financial impacts.
• Acknowledging competitors.

These steps may help clear up any miscommunication and create transparency within your business or organization. Knowing how to properly delegate and implement your vision and direction can be one of the most successful methods for overcoming failure. 

Prioritize Your Business’s Success With AchieveIt’s Strategic Planning Solutions

Any successful business understands the importance of a well-constructed strategic plan. At AchieveIt, we want to help you increase visibility, improve accountability, and establish uniformity with our strategic planning software. Our strategic planning management platform will allow you to turn your strategic plans into reality by providing tools that ensure your key plans and projects progress. With our software, you can spend less time collecting updates and more time making decisions to move your organization forward.

If you want to improve the way you execute your strategic business plans, contact us today or schedule a free demo to see how we can help you achieve more.

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Why Do So Many Strategies Fail?

• David J. Collis

Today it’s not unusual for corporations that have dominated their markets for decades to be blindsided by upstarts with radical new business models. A lot of young ventures, on the other hand, raise vast sums of money and attract tens of millions of customers, only to collapse when they can’t figure out how to fend off imitators. In these situations and many others, the underlying cause is often a failure to take a holistic approach to strategy.

Strategy today demands more than classic competitive positioning. It requires making carefully coordinated choices about the opportunities to pursue; the business model with the highest potential to create value; how to capture as much of that value as possible; and the implementation processes that help a firm adapt activities and build capabilities that allow it to realize long-term value. Neglecting any of those imperatives can derail a strategy, but CEOs frequently zero in on just one. Entrepreneurs tend to focus on identifying a golden opportunity and don’t think enough about how to monetize it; leaders of incumbents, on capturing value but not new ways to create it.

By tackling all the elements of strategy and integrating them well, however, firms will greatly increase their odds of success.

Leaders focus on the parts rather than the whole.

Idea in Brief

The problem.

Seemingly successful new companies struggle to turn a healthy profit. Established firms get disrupted by upstarts. Companies that excel at serving their markets can’t adapt when customers’ tastes shift.

The Root Cause

All too often business leaders focus on one element of strategy—such as identifying a golden opportunity presented by new technologies or building advantages that competitors lack. But they either ignore the other components of strategy or don’t recognize the components’ interdependencies.

The Solution

Take a holistic approach and craft a strategy that encompasses carefully coordinated choices about the business model, the competitive position, implementation processes that adapt constantly to the changing environment, and the capabilities needed to win in the long term.

The CEO’s job of crafting a strategy that creates and captures value—and keeps realizing it over time—has never been harder. In today’s volatile and uncertain world, corporations that have dominated their markets for decades can be blindsided by upstarts with radical new business models, miss the boat on emerging technologies, or be outflanked by competitors that are more adept at shaping consumer preferences. Young ventures can raise hundreds of millions of dollars, attract tens of millions of customers, and achieve lofty market valuations, only to collapse when they cannot figure out how to turn a profit or hold off imitators.

• David J. Collis is an adjunct professor of business administration at Harvard Business School and the winner of the McKinsey Award for the best HBR article of 2008.

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9 Major Reasons Why Businesses Fail by Year 2 and How to Avoid Them

Posted january 28, 2021 by jake pool.

According to the Bureau of Labor Statistics, over thirty percent of private companies fail within two years.

Of course, there are external factors that businesses have no control over. Sadly, the COVID-19 Pandemic is a prime example of one. Since such events are unavoidable, let’s focus on internal factors that companies can act on.

9 common issues to avoid when running your business

As a new business owner, what are the traps to avoid from the start? And what can you do to stay in business? By understanding the following pitfalls you can hopefully avoid them and keep your business running smoothly for far longer than 5 years. Let’s dive in.

1. Insufficient funds due to weak forecasting

Without a doubt, poor financial forecasting is the main reason businesses fail.

It is relatively easy to plan fixed costs such as rent, payroll, utilities, hardware, etc. Entrepreneurs should vet this out extensively when writing their initial business plan.

However, it can be more challenging to forecast revenue generated from sales . Many new business owners are overoptimistic in their planning and vision. This results in an inability to amortize (pay off) an initial investment. Thus, the business fails.

Similarly, companies may be tempted to launch their product or services at a cheap price to be competitive. While it can work in the short-term, it’s not a sustainable business model. Once you start with a low price, it’s difficult to increase.

Goals should be ambitious, but attainable. And the budget should reflect accordingly.

2. The business lacks value

The success of any business hinges of its value. It might sound obvious, but it’s not that easy. As a business owner (or future), you probably think your product or service is great. But it’s not enough.

Before launching a business, always do extensive research (there is a lot of data available) on your target audience. Benchmarking and surveys are also a must.

Here are some generic survey questions to ask:

• Would you talk about this product or service with others?
• Have you ever heard of a similar product or service?
• How much would you pay for this product or service?

If your product is only valuable to you or a small group, or it doesn’t offer more value than your competition, it’s time to rethink things.

3. Inadequate business plan

As mentioned in the first point, budgeting is a key element of a business plan . But it’s not the only factor within the plan that will break a business.

A good business plan should include:

• A comprehensive description of the business
• Workforce needs and compliance (current and future)
• SWOT analysis
• Benchmarking Analysis
• Marketing Plan

But a solid initial business plan isn’t enough. Business owners should review and modify it regularly to keep with the pace of the industry and assess internal goals.

Many failed businesses in this scenario end up listed on business marketplaces like UpFlip because there are entrepreneurs out there equipped to change a poor business plan.

4. No connection with the target audience

The first questions any business owner should ask are — Do I know my target audience and do I understand what they need and want?

If you can’t answer those questions, it’s time to conduct more surveys and research. Otherwise, there is a disconnect, and the business will ultimately suffer and fail. It seems like a bold statement, but the biggest part of a purchasing decision is emotion.

Your product or service may have wonderful features and even value, but if it doesn’t connect with your target audience on an emotional level, it will fail.

For example:

If you run an office furniture business, obviously, the technical aspects of your premiere desk chair would be a sales point. But sturdy wheels and a comfortable backrest won’t differentiate you from the competition. 

Yes, you sell a chair. But also sell the idea of success, professionalism, or even luxury. The target audience must connect with your product on those levels. Otherwise, the business won’t stand out.

5. Competition is too stiff

Even with a comprehensive benchmarking analysis in the initial business plan, competition can evolve quickly. In many industries, there are new players every day in their respective markets.

To avoid failure, benchmarking must be a continuous effort. If your competitors are too big, it’s in the business’s interest to find a niche or some form of added value to your products or services.

Take TOMS Shoes , for instance. They broke into the highly competitive world of mid-level shoe sales by offering a socially conscious selling point to the value of their shoes. For every purchase, they give a pair of shoes to a child.

Note how their model also connects with their target audience at an emotional level.

6. Poor management

The success of a business comes from the top down.

Small business owners are often the only managers within a company. While it may work sometimes, it’s advisable to form a proper management team or at least hire a general manager.

Business owners don’t always have the necessary skills or time to be a good manager. Poorly managing or overlooking certain aspects of the business like human resources, marketing, or accounting can have a disastrous effect.

It’s important to learn to delegate to avoid wearing too many hats.

If you don’t have the money or infrastructure to hire full-time help (or in-house), think about outsourcing certain management tasks to a qualified freelancer via Upwork or a similar platform.

Otherwise, someone who can manage the company will soon take over.

7. Lack of a company culture

There is no happy company without happy employees. You may have a great business model and entrepreneurial skills, but the success of the company also depends on the staff.

It’s key to outline and implement a strong company culture from the beginning. And make sure that the people hired align with it.

Once in place, feed and maintain the culture mentality. Otherwise, you risk issues with high turnover. This has led to the internal collapse of many businesses in a shorter time span than two years.

8. Ineffective sales funnel

Getting leads is essential for any company, but your leads are worthless if they don’t convert. Many new companies focus on collecting data and leads and fail to nurture them properly.

To avoid bloating your sales pipeline , you need an effective sales funnel from beginning to end (and beyond!). It could vary depending on the industry, but be sure to nurture your leads as long as needed to complete the sale.

In the ideal sales funnel, leads convert when ready and become ambassadors of the brand. With a quality, automated system, you can sit back and watch it happen.

Here are a few ideas on nurturing leads:

• Send industry-related freebies (How-to Guides, Tools, White papers)
• Share relevant blog articles based on interest (personalization)
• Wish them a Happy Birthday! (Gift, Voucher)
• Set up a referral program with incentives
• Engage with leads on social media
• Use chatbot technology to answer FAQs when unavailable
• Newsletters (Old fashioned, but efficient!)

In other words, create and maintain a relationship even after the sale!

9. Bad marketing

In the early stages of a business, marketing is crucial. The key is to find the right balance between a reasonable budget and efficiency. Fortunately, this is possible thanks to digital marketing.

The two biggest advantages to investing in digital marketing campaigns are cost efficiency and measurable results (as opposed to traditional marketing methods such as print or tv advertising).

When setting up a marketing campaign, define the target audience, budget, and a realistic conversion rate. Again, if you need help, think about outsourcing for Google Ads or social media campaigns .

Many companies fail because of an inefficient marketing plan that allocates funds to ineffective channels or to ineffective content. And when it’s too late, it’s difficult to redirect funds to make up for the loss.

Awareness is key

As stated, some external factors that negatively affect a business are unavoidable, but there are many internal factors business owners can act upon to prevent failure. The first two years are critical to creating a perennial business.

Be aware of these reasons and don’t become a statistic!

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1. Financing Hurdles

2. inadequate management, 3. ineffective business planning, 4. marketing mishaps.

• Small Business Failure FAQs
• Small Business
• How to Start a Business

The 4 Most Common Reasons a Small Business Fails

Running a small business is not for the faint of heart

Running a business is not for the faint of heart; entrepreneurship is inherently risky. Successful business owners must possess the ability to mitigate company-specific risks while simultaneously bringing a product or service to market at a price point that meets consumer demand levels.

While there are a number of small businesses in a broad range of industries that perform well and are continuously profitable, about 33% of small businesses fail in the first two years, around 50% go belly up after five years, and roughly 33% make it to 10 years or longer, according to the Small Business Administration (SBA) .

To safeguard a new or established business, it is necessary to understand what can lead to business failure and how each obstacle can be managed or avoided altogether. The most common reasons small businesses fail include a lack of capital or funding, retaining an inadequate management team, a faulty infrastructure or business model, and unsuccessful marketing initiatives.

Key Takeaways

• Running out of money is a small business’s biggest risk. Owners often know what funds are needed day to day but are unclear as to how much revenue is being generated, and the disconnect can be disastrous.
• Inexperience managing a business—or an unwillingness to delegate—can negatively impact small businesses, as can a poorly visualized business plan, which can lead to ongoing problems once the firm is operational.
• Poorly planned or executed marketing campaigns, or a lack of adequate marketing and publicity, are among the other issues that drag down small businesses.

A primary reason why small businesses fail is a lack of funding or working capital . In most instances a business owner is intimately aware of how much money is needed to keep operations running on a day-to-day basis, including funding payroll; paying fixed and varied overhead expenses, such as rent and utilities; and ensuring that outside vendors are paid on time; however, owners of failing companies are less in tune with how much revenue is generated by sales of products or services. This disconnect leads to funding shortfalls that can quickly put a small business out of operation.

A second reason is business owners who miss the mark on pricing products and services. To beat out the competition in highly saturated industries , companies may price a product or service far lower than similar offerings, with the intent to entice new customers.

While the strategy is successful in some cases, businesses that end up closing their doors are those that keep the price of a product or service too low for too long. When the costs of production, marketing, and delivery outweigh the revenue generated from new sales, small businesses have little choice but to close down.

The Small Business Administration (SBA) helps small businesses find loans for different needs, offering a variety of loan programs.

Small companies in the startup phase can face challenges in terms of obtaining financing in order to bring a new product to market, fund an expansion, or pay for ongoing marketing costs. While angel investors, venture capitalists, and conventional bank loans are among the funding sources available to small businesses, not every company has the revenue stream or growth trajectory needed to secure major financing from them. Without an influx of funding for large projects or ongoing working capital needs, small businesses are forced to close their doors.

To help a small business manage common financing hurdles, business owners should first establish a realistic budget for company operations and be willing to provide some capital from their own coffers during the startup or expansion phase.

It is imperative to research and secure financing options from multiple outlets before the funding is actually necessary. When the time comes to obtain funding, business owners should already have a variety of sources they can tap for capital.

Another common reason small businesses fail is a lack of business acumen on the part of the management team or business owner. In some instances, a business owner is the only senior-level person within a company, especially when a business is in its first year or two of operation.

While the owner may have the skills necessary to create and sell a viable product or service, they often lack the attributes of a strong manager and don't have the time to successfully oversee other employees. Without a dedicated management team, a business owner has greater potential to mismanage certain aspects of the business, whether it be finances, hiring, or marketing.

Most small businesses start out with the entrepreneur's savings or money from friends and family and then look for outside financing to grow.

Smart business owners outsource the activities they do not perform well or have little time to successfully carry through. A strong management team is one of the first additions a small business needs to continue operations well into the future. It is important for business owners to feel comfortable with the level of understanding each manager has regarding the business’ operations, current and future employees, and products or services.

Small businesses often overlook the importance of effective business planning prior to opening their doors. A sound business plan should include, at a minimum:

• A clear description of the business
• Current and future employee and management needs
• Opportunities and threats within the broader market
• Capital needs, including projected cash flow and various budgets
• Marketing initiatives
• Competitor analysis

Business owners who fail to address the needs of the business through a well-laid-out plan before operations begin are setting up their companies for serious challenges. Similarly, a business that does not regularly review an initial business plan—or one that is not prepared to adapt to changes in the market or industry—meets potentially insurmountable obstacles throughout the course of its lifetime.

To avoid pitfalls associated with business plans, entrepreneurs should have a solid understanding of their industry and competition before starting a company. A company’s specific business model and infrastructure should be established long before products or services are offered to customers, and potential revenue streams should be realistically projected well in advance. Creating and maintaining a business plan is key to running a successful company for the long term.

Business owners often fail to prepare for the marketing needs of a company in terms of capital required, prospect reach, and accurate conversion-ratio projections. When companies underestimate the total cost of early marketing campaigns , it can be difficult to secure financing or redirect capital from other business departments to make up for the shortfall.

Getting your company's name in front of your customers is a crucial aspect of any early-stage business. It is necessary for companies to ensure that they have established realistic budgets for current and future marketing needs.

Similarly, having realistic projections in terms of target audience reach and sales conversion ratios is critical to marketing campaign success. Businesses that do not understand these aspects of sound marketing strategies are more likely to fail than companies that take the time to create and implement cost-effective, successful campaigns.

What Is the Small Business Failure Rate?

Approximately 33% of small businesses fail in the first two years, 50% fail within five years, and 33% make it to 10 years and further.

What Are Some Signs That Your Business Is Failing?

Signs that a business is failing include small levels or lack of cash, inability to pay back loans on time, inability to pay suppliers on time, customers that pay late, loss of clientele, and an unclear business strategy.

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Subscribe for exclusive access, why do businesses fail here are solutions for 10 common causes..

Written by Grant Olsen | February 2, 2022

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There are all kinds of conflicting statistics and opinions for why businesses fail . The headline of one report might proclaim that “90% of businesses fail in the first 3 years,” while another asserts that by following their tips, “You can enjoy a 90% chance of success.”

It’s difficult to accurately aggregate the numbers and find global statistics on business failures, so we’ll use the United States as a microcosm for trends that are also relevant in Australia, New Zealand, Canada, the UK, and other parts of the world.

Here’s a look at survival rates when viewed at the end of the first, fifth, and tenth years:

• 80% of businesses survive their first year
• 50% of businesses survive 5 years or longer
• 33% of businesses survive 10 years or longer

While these statistics highlight the fact that there’s certainly a risk of failure, they’re higher than some of us might expect. Anytime you’re looking at a vast collection of disparate individuals attempting something difficult, you’re going to see similar trends.

For example, let’s look at how many first-time college students seeking a 4-year degree stay the course all the way to graduation day:

• 33% of students graduate with a bachelor’s degree in 4 years
• 57% of students have graduated with a bachelor’s degree by 6 years

Some of the remaining 43% of students who didn’t graduate within 6 years will likely go on to attain their degree in later years, but it’s too inconsistent of a number to show up in most studies. For thousands of different reasons, hundreds of thousands of students fail to attain their bachelor’s degrees.

So the percentage of businesses that survive 5 years or more is strikingly similar to the percentage of students who earn a degree by 6 years. Sure, things happen that derail many of the businesses and students. But at least half of them are still standing after 5-6 years.

Why Small Businesses Fail to Change

Just as many of those students who earned degrees switched majors during their college experience, it’s critical for business owners to maintain flexibility in their structure and operations. If the COVID-19 pandemic has taught us anything, it’s the immense value of a well-time pivot. Whether your change is compelled by a new idea or the pressures of the times, never hesitate to innovate.

As Dan Fries explains :

Sometimes a crisis, while always tragic, can force some positive effects. It might not feel like that right now, but by responding to COVID-19 will teach you some valuable skills. In other words, this is not the only crisis you are going to face as your business grows, and the lessons you learn in the next few months will be extremely useful when it comes to scaling your startup further down the road. In fact, some of the tools and processes above are likely to be relevant long after the current pandemic has passed.

When businesses embrace this open-minded approach, they usually find themselves among the 50% that are still strong after 5-10 years. As the old saying goes, “If you’re flexible, you’ll never get bent out of shape.”

Yet many business owners remain rooted in their old ways. It’s understandable that they believe in their products or services, and are attached to the business model. After all, it was these elements that inspired them to take entrepreneurial risks in the first place.

But if you love something, you need to take care of it. And part of nurturing your business is being willing to change directions when outside pressures are threatening it. Stubbornness can be mildly amusing in childhood friends or cranky great-uncles, but it can be devastating for a business.

Why do businesses fail when they resist change? Because they’re refusing to acknowledge the primacy of the customer. Let’s review a few examples of roadblocks to success that arose during the pandemic, and how they all connected back to the role of the customer:

• Lockdown prevents a restaurant from serving customers inside the building. This scenario has played out again and again in nations around the world. It presents many dilemmas, but none larger than the inability of a business to directly serve its customers. Successful restaurants found ways to provide new pickup and delivery options, serve their communities, and even send meal kits by mail. They kept providing a quality product, though it might’ve looked much different.
• The supply chain is disrupted. The inability to source the materials or ingredients necessary for your current model is problematic. But the main issue is that it prevents you from delivering what your customers are seeking. If replacements couldn’t be found for the supply chain, a pivot was required. For example, a bakery that couldn’t source eggs might stop selling baked goods and begin selling dry mixes to customers.
• Depleted finances make it harder for customers to make purchases. With customers in many areas struggling to meet financial obligations such as rent and mortgages, it’s no wonder that some had to curtail purchases. By finding ways to lower costs so you can lower your prices, introducing tiered pricing, or creating new product options altogether to meet your customers’ needs, successful businesses continued to meet the needs of those who historically had depended on them.

Whether you’re struggling with cash flow issues or have a broken supply chain, your ability to deliver for your customers will always be the real issue. And discovering new ways to meet their needs will always be the real solution.

The fact is that pandemics will emerge, trends will evolve, and economies will fluctuate. So if you insist on moving your business forward in the exact same way regardless of these external factors, you’ll instead find your trajectory rapidly nosing downward.

The alternative is to commit to meeting your customers’ needs no matter what occurs. While it won’t guarantee a smooth journey, this North Star will guide you through all manner of catastrophes and downturns.

9 More Reasons Why Businesses Fail

We’ve identified the inability to adapt to their customers’ needs as a major contributor to businesses that go under before reaching their 1-year, 5-year, and 10-year anniversaries. When your customer is kept at the forefront, all your other efforts will steer you in the right direction.

But there are many other specific risks facing young businesses. These are risks that you should anticipate early and be on the alert for as time goes on.

With that in mind, let’s now look at 9 other reasons why businesses fail:

1. Poor Planning

Coming up with a great business idea is only the first step because it can’t go anywhere unless it’s supported by a solid plan . Outline where you’ll go in your first month, first 3 months, first year, and first 3 years. Make the milestones measurable so that you’ll know if you’re on track.

Of course, things will occur that necessitate updates to your plan. But the point is that you have a master document that outlines how you’re going to stand out from the competition, how you’re going to deliver value to customers, how you’re going to build your culture, and how you’re going to ultimately thrive.

2. Hiring the Wrong People

We get it—there’s a lot of pressure to build your team in a timely manner so that you can launch a business. But rushing this stage can kill your chances for long-term success.

You need to find people who believe in what you’re doing and have the skills to improve the ways you’re doing it. In the crucial early stages of a business, negative employees can quickly sink morale and overall performance.

3. Failing to Foster a Good Culture

As you assemble your team, communicate openly about the culture you’re seeking to build. Ask their opinions and make a point of incorporating new ideas from your team. The businesses that prioritize profits over people or have a leaders-versus-employees dynamic often fall by the wayside because their toxicity trickles right out of the office and can be sensed by suppliers, partners, and ultimately, customers.

4. Growing Pains

Plenty of defunct companies launched with a strong culture but lost it as the company scaled. There’s obviously no way to maintain all your team’s perks and traditions as new employees swell the ranks, but you can keep the heart of who you are.

Make sure that you continue seeking your team’s input and act on their ideas. New hires will bring innovative suggestions to make things better, while the old guard can share the things that you should most think about retaining.

5. Failure to Stand Out

Even if your business idea is a gem, you’ve still got to communicate it effectively to your audience. Otherwise, you’ll just get lost in the shuffle.

Using the market research from your business plan, craft a unique selling proposition that boldly articulates what makes you different from the rest. Questions to answer include:

• What unique value do I offer?
• Why is my solution better for customers?
• How can I communicate these important differences?

The more you can differentiate your brand, the better your chances for success.

6. Not Focusing on the Essentials

Plenty of businesses lose their way in the first year as distractions pull them from the very things that give them a competitive edge. For example, if your quirky product packaging is beloved by customers, don’t ditch it as your business grows. Instead, find ways to make the packaging more efficient so that it complements your efforts to scale.

When your business stays focused, you’re better able to deliver on your unique selling proposition and to adapt to unforeseen bumps in the road.

7. Not Controlling Expenses

Launching a business is expensive. And growing that business involves a whole new set of financial demands. So it’s understandable that many businesses struggle to keep up with the pace.

You’ll put yourself in a much stronger position by carefully watching your expenses . If something doesn’t help you deliver an even better experience to your customers, it might not warrant the cost. This goes for everything from Netflix on the breakroom television to the vehicles you rent on business trips.

8. Not Managing Inventory

Balancing acts are hard enough for any person, which is why those who perform on the trapeze are referred to as “artists.” But business owners must control the inventory so they don’t lose sales from insufficient numbers or burn through capital by allowing too much inventory to pile up.

You can avoid these fates by investing in inventory management software that helps you track items through the supply chain, in your warehouse, and all the way to final deliveries .

9. Inadequate Profit Margins

It’s possible to bring in substantial revenue and still find yourself in financial danger. One of the factors that have claimed many young businesses is inefficient processes and poor pricing strategies that lead to low profits.

Your business provides distinct value to customers, so you should feel confident setting prices that reflect this fact.

Get the Skills That Won’t Let Your Business Fail

Want more strategies to help your business excel? We’ve prepared a library of free business courses that cover everything from finance to negotiations to advertising. Taught by proven entrepreneurs from a range of industries, they provide the type of insights that usually take years to acquire. In this way, you can fast-track your success and avoid many of the threats that impact other businesses in their early years.

About Grant Olsen

Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

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20 reasons why small businesses fail and how to avoid them.

The failure rate of small businesses is significant—as many as 45% of start-ups don’t survive the first 5 years. 1 Exploding Topics, Startup Failure Rate Statistics . So why do so many businesses fail? The primary causes of business failure are cash flow problems, poor financial planning, and a lack of market awareness.

We’ll explore 20 reasons why small businesses fail so you can avoid common pitfalls and develop a strategy to help your business grow and thrive.

Key Takeaways 

• Most small businesses fail within the first 10 years.
• Common financial reasons include poor pricing strategies, insufficient funds, and cash flow.
• Creating a clear business plan can help small business owners avoid common failures.
• Understanding your target market is key to creating a good business strategy.

Table of Contents

• Lack of Planning
• Choice of Location
• Lack of Research
• No Business Plan
• Poor Pricing Strategy
• Insufficient Funds
• Cash Flow Problems
• Poor Debt Management
• Dependence on One Customer
• Inadequate Profit
• Competition
• Lack of Market Demand
• Unexpected Growth
• Lack of Experience
• Ignoring Customer Needs
• Poor Management
• Ineffective Marketing
• Lack of Innovation
• Forgetting the Customer
• Ineffective Leadership
• Frequently Asked Questions

1. Lack of Planning

A clear vision is key to successfully running your small business. Start by setting research-backed goals for your company: what benchmarks do you want to reach in your 1st year? In your 5th year?

Setting timelines helps you keep on track with your goals and helps you make adjustments if you find you’re not where you want to be. Create a strategy for your business growth and set up check-in points. 

For example, check in every 2 months to make sure you’re on track to reach your goals. This gives you a chance to follow up with what’s working well and change anything that needs to be modified to help you stay on track.

2. Choice of Location

Business location is one of the most important decisions you can make when setting up a new small business. If you provide in-person goods or services, you need to make sure that there’s enough local demand to support your business. 

Businesses like bakeries and shops often rely on foot traffic for success, so visibility is key. Other industries like lawn care require you to commute to your customers, so you’ll want to pick a central location to minimize transportation costs.

If you offer remote services, location is still important—if you have some flexibility, consider how business taxes vary between states and municipalities. 

It’s also important to consider how you might expand in the future. If you see yourself opening up a second location, look for an area that has room to accommodate your future business growth. 

3. Lack of Research

Understanding your industry, competitors, and target market is key to business success and survival. Research common pitfalls in your industry so you can understand the specific challenges your company might face.

It’s also important to learn about your competitors. See how your services and prices compare to theirs, and consider whether you can offer any niche contributions to set your business apart.

Learn what customers are looking for from your company so you can deliver tailored experiences. Some demands are evergreen (constant), while others vary with market trends—research can help you determine and predict market trends so you can stay on top of your customers’ needs.

4. No Business Plan

In addition to your overall vision for your company, you’ll need to create a clear and actionable business plan. This helps communicate your vision to investors and other team members. There are many resources available to help you create a business plan, including business plan templates .

Your business plan should include:

• A description of your company and what you offer
• A market analysis including threats and opportunities
• Competitor analysis
• Marketing plan, including target customer profile
• Budget and projected cash flow
• Scalable growth plan

You’ll want to regularly revisit this business plan and review the success of each strategy. If you find anything that’s not serving your business, catching that early and making the right adjustments can be the difference between failure and success.

5. Poor Pricing Strategy

Setting the right price is a delicate challenge, but it’s essential for surviving as a small business. You need to price high enough that you cover your costs and make a profit, but low enough that it’s still accessible to a large customer base.

Start by understanding the costs involved in delivering your product or service. Calculate all the materials and labor costs, then factor in your profit margin .

Next, compare your prices against competitors. When you first start out, you may not be able to match the prices and profits of more established companies. If you find your prices are significantly higher, you might need to decrease your profit margin slightly. 

Remember that even if you can’t exactly match your competitors, there are other strategies you can use to distinguish your business—competitor prices are a guideline, not a hard rule.

6. Insufficient Funds

Financing is a common challenge for new businesses, and it’s important to ensure you have sufficient funds right from the start. There are a range of financing options you can consider, from small business loans to investor support. Research all your options and compare how they’ll support you in the short and long term.

It’s also important to effectively manage your finances once you’ve acquired start-up capital . Make sure you understand all of your business costs including licenses, materials, taxes, and labor. Balance that against your projected profits to make sure you’ll be able to stay operative through the first few challenging years.

7. Cash Flow Problems

Financial management isn’t just about the big picture—it’s also about the way your business spends cash in day-to-day business operations. Make sure you keep track of all the ways your company spends money, from larger costs like rent and labor to everyday transportation costs.

It’s easy to get caught up in things like marketing and product development and run out of cash flow early on. Make sure you have a clear budget that you review regularly to ensure you have sufficient cash flow to manage your business.

8. Poor Debt Management

There’s more to small business financing than just start-up capital and cash flow: you’ll also want to stay on top of any debt and ensure your credit remains strong. If not managed carefully, these challenges can easily spiral out of control and sink a small business.

It’s not uncommon for new entrepreneurs to assume some debt as a new business—you might have taken a start-up loan as part of your initial process. However, that debt can become problematic if you’re not making enough profit to consistently make your payments.

One of the most common signs of impending debt issues for small businesses is delaying bill payments. If you find that your business is struggling to meet bills, debt , or credit card payments, it’s time to do a close examination of your finances and cash flow to see where you might be able to cut costs and get on top of any financing issues before they become a larger problem.

9. Dependence on One Customer

Building customer relationships is important, but it can be risky to become too reliant on just one customer. Even if that customer represents a large share of your current profit, there’s never a guarantee that they’ll be able to sustain your company.

Once you’ve found a great customer, analyze how you won that customer and see how you can apply those strategies to finding new customers. Consider what that client was looking for and how they found your company so you can understand what worked well in your next marketing campaigns .

Build a customer profile and focus your marketing on reaching clients who fit that profile. See if they tend to live in a certain area, frequent a certain job or social media platform, or search for particular keywords. Try to diversify your customer base so you aren’t reliant on just one client for your business survival. 

10. Inadequate Profit

Most small businesses have low profits in their first few years, but there’s a point where those profits can become too low to survive. If you find that your profits aren’t enough to cover your expenses , it’s time to think about profit maximization strategies.

One of the first things to examine when you’re facing inadequate profit is your current cost management. Are there any areas where costs can be cut? Consider whether there are more affordable manufacturers, equipment options, or business spaces available to you.

You can also examine your pricing strategies. If you start by pricing low and you’re selling a large volume but still not making a good profit, your prices may be priced too low. Calculate how much you would have to raise your prices to make enough profit, and test out slightly higher prices to see how customers respond.

11. Competition

Even if you offer great products and services, it can still be hard to survive if you’re facing a lot of competition. Conduct a market analysis to see how many competitors are in your industry and area, what products they offer, and how their prices compare to yours.

Once you have a thorough understanding of your competitors, you can devise strategies to set yourself apart. This can include everything from offering competitive prices to providing a higher-quality product. You can also explore marketing strategies or consider how you can offer a slightly different product to fill a market niche.

12. Lack of Market Demand

Even the best businesses can fail if there’s no demand for their product. Market demand also fluctuates, so what’s in demand today can change by tomorrow. Keeping track of market trends and demand can help you stay ahead of the curve with what your company offers.

Start by assessing what’s currently in demand and how you can pitch your product to meet that demand. As customer needs evolve, you may need to slightly alter your products to adapt to changing customer needs.

13. Unexpected Growth

Growing your business is a hallmark of success, but it can also pose risks if you expand too rapidly without a clear plan. Unexpected growth can lead to over-extending your resources, overworking employees, and losing track of customers.

To prevent fallout from unexpected growth, it’s essential to have a scalable business plan. Make sure you can still deliver high-quality goods and services as you expand, so your customers stay satisfied. Keep track of how much money and labor you’re expending on new services so you can bring on new employees as you grow.

It’s all about striking a balance—you want to make sure you hire enough talent to keep up with growth but avoid hiring too early in case your growth slows down. Tracking your expenditures in relation to growth is the best way to create a plan for the future.

14. Lack of Experience

Successful business owners need vision and passion, but they also need experience to translate into their goals into a successful company. Lack of experience and industry knowledge can hold your business back, so it’s important to build a dedicated management team with a thorough understanding of the market.

A business mentor can help you manage the small business owner aspects of your company. Look for someone with experience managing their own business who can advise you on things like developing a business plan , hiring the right talent, and pitching to investors. 

It’s also important to bring on experts in your industry. Look for experienced financial advisors who can guide you through developing your financial strategies. You’ll build experience as you grow, but it’s a good idea to bring in experts for specific jobs like marketing and accounting.

15. Ignoring Customer Needs

The best source for understanding market demand is customers themselves. Responding to feedback helps you build strong relationships with your existing customers and helps you understand what you need to do to gain more customers.

Listen to customer feedback on pricing, services, accessibility, and any other concerns they may have. In some cases, you may not be able to accommodate every suggestion, but it’s helpful to respond and then do a cost-benefit analysis and see how making the recommended changes might impact your business.

If you feel like you’re not receiving customer feedback, consider reaching out. Comment and feedback forms after a completed order can be a helpful tool for gaining market analysis in real-time.

16. Poor Communication

Having a clear vision that you can communicate to investors and customers is important, but it’s just as key to having strong communication inside your business. When your team doesn’t understand your business goals, it’s harder for everyone to collaborate efficiently. 

If you’re operating your small business as a partnership, it’s fine to have different skill sets, but you need to be on the same page about vision and goals. Creating a business plan collaboratively can help ensure you agree on the primary strategies for your company.

Weak communication can lower morale and productivity and prevent your business from growing effectively. Consider making a modified version of your business plan that you can share with your employees. This can include an overview of your business goals and strategies to help everyone get on the same page.

17. Ineffective Marketing

Even with great products, your business can’t succeed unless you effectively reach your target market. Ineffective marketing strategies can hold you back from connecting with customers, while great marketing helps you reach new audiences and grow your business.

It’s important to have a targeted campaign with a clear focus. Start by identifying your target customers and learning about how they interact with local businesses. This helps you determine where to place ads, what to offer, and how to speak to potential customers.

Make sure your marketing strategy has a way to track results. That could include tracking impacts and clicks, measuring follow-through, and consulting with new customers to discover how they found your business so you can build on your most effective strategies.

18. Lack of Innovation

A great product at the start of your business may not remain competitive as the market changes. Innovation is essential for ensuring your business stays relevant and continues to be successful. 

This doesn’t mean you have to drop products if they’re still performing well, but it’s a good idea to consider how you can improve or develop new products if you have the capital to spend on development. This helps you stay ahead of the curve in a changing market.

Even with evergreen products, your business practices can still become stagnant. You’ll need to find new marketing strategies to reach new customers so that you can have a continuous revenue stream. Innovation spans all components of your business, from product development to new marketing methods.

19. Forgetting the Customer

Even if a product seems great to you, remember that in the end, it’s about the customer and how the product will meet their needs. Focus on learning about what the customer is looking for—what’s missing from current products, and how can your business satisfy that need.

If customers offer feedback, try to learn from that and incorporate it where possible. This can involve product innovation or customer service relationships. Customers will remember a great product, but they’ll also remember a personable and helpful business interaction.

Check-in with customers to make sure they’re fully satisfied with their experience. One way to do this is to send a follow-up email or form after their purchase. You can incentivize feedback by offering a small discount for filling out the form—this also encourages customers to return to your business.

20. Ineffective Leadership

While a great team and expert advice are important in supporting your business, it’s ultimately up to you to lead your company forward. If you’re burnt out or losing track of your vision, your team won’t know where to follow.

Strong leadership helps cultivate a positive company culture, a motivated team, and great client relationships. Your employees take their cue from you, so make sure to set a strong model for interacting with customers. 

Creating a good company culture starts with forging strong employer-employee relationships. Get to know your employees, their goals, and their challenges at work so you can help them perform their best. When you create a work environment that’s supportive and growth-oriented, it encourages your team to deliver their best work and help build your business.

The reasons why small businesses fail can include everything from poor pricing strategies to ineffective marketing. Learning how to recognize problems like poor management and inexperience can help you identify issues in your company before they impact your success.

Understanding and recognizing why small businesses fail can help you create strategies to avoid common pitfalls. Tools like FreshBooks accounting software can also help you manage your expenses and avoid problems like insufficient cash flow. Try FreshBooks free to discover an easy tool to help your small business thrive.

FAQs on Reasons Why Small Businesses Fail

Is it true that 90% of startups fail.

Yes, ultimately about 90% of startups fail. A few fail in the first year, and most new businesses fail in the first 2 to 5 years. After 5 years, businesses that survive tend to see a small rise in profits and growth.

Why are small businesses declining?

Some of the biggest reasons why small businesses decline are market competition, lack of demand, and lack of financing. In many cases, larger and more established companies make it difficult for new small businesses to enter the market.

What is the biggest problem facing small businesses today?

One of the biggest problems currently facing small businesses is inflation. High inflation rates mean higher input costs for products, and usually also mean employees will seek higher salaries. It can also mean higher interest rates when trying to secure a first business loan.

Why are small businesses failing in today’s economy?

Many small businesses are failing in today’s economy because they lack planning and financial preparation. While market competition and funding pose challenges to business owners, these can be overcome with financial preparedness and a clear business plan.

Article Sources: 

• Exploding Topics, Startup Failure Rate Statistics .

Sandra Habiger, CPA

About the author

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

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Home » The Tony Robbins Blog » Career & Business » 14 reasons why businesses fail

14 reasons why businesses fail

Learn more about business failure – and how to avoid it.

WHY BUSINESSES FAIL

So why do businesses fail ? What makes one entrepreneur succeed while another experiences business failure ? It comes down to a combination of preparation, strategies and knowledge. 

1. Not having an effective business plan

If you don’t have an effective business plan, you can’t properly communicate your vision to your team. Tony Robbins advocates not just having a business plan, but having a business map for entrepreneurs to take their small businesses to the next level. Your business map will help you master vital stages of the business cycle, like scaling. Explosive growth can be tempting, but not scaling in a mindful manner is one of the biggest reasons why businesses fail – you have to strike the right balance between growth and infrastructure.

2. Not putting the customer first

One of the top reasons why businesses fail is that they fall in love with their product instead of their customer. To circumvent business failure , fall in love with your client and figure out every single way you can meet their needs. Anticipate what they want, what they need and, when possible, determine what they might not even know they need yet. Turn your customer into a raving fan – somebody who will tell everybody about your product or service or company. Once you grasp that your customer’s life is your business’ life , you can truly envision how to succeed.

3. Not hiring the right people

Hiring the right people has a massive effect on nearly every area of your business. One of the most obvious examples is sales: If you don’t have enough sales, you can’t pay your team or yourself and you cannot grow. Confident salespeople are a key to increased sales. It’s also astounding how many businesses fail due to inventory mismanagement. Hiring someone who is skilled at inventory management or using a good inventory management software is an easy way to solve this issue.

4. Doing it all yourself

Yes, you are an entrepreneur, but that doesn’t mean you have to do everything on your own. A business is only as strong as the psychology of its leader – and the ability to let go and trust others is an essential leadership trait . If you need to control everything, it’s likely you won’t succeed over the long term. Delegating is a top skill to manage a business effectively : it helps you manage your time, focus your energy on what matters most and spot potential up-and-coming leaders within your company.

5. Lack of flexibility

Remember Blockbuster? Radio Shack? Tower Records? These giants of their industries all fell victim to the same reason for business failure : inability to adapt to a changing market . Entrepreneurs who fall in love with a service or product and refuse to change directions when the market demands it are likely to fail. The key to long-term success – in business and in life – is flexibility and a willingness to pivot when necessary.

6. Lack of innovation

Peter Drucker and Jay Abraham, among the greatest business minds of our time, maintain that business failure – and success ­– all starts with two key factors: innovation and marketing . Innovation means finding a better way to meet your clients’ needs than anybody else. Anybody can make some money for some amount of time. But if you want to become successful and sustain that success over years and over decades – if you want to build a brand – then you have to find a way to add more value than anybody else in the game. And that comes from constantly innovating.

7. Not understanding your industry

This is one of the driving factors behind why businesses fail to innovate. Certain industries require more innovation, while others may have different product life cycles. Consider the technology industry. The life cycle on an average product is about six months. And in some sectors, like the app business, it’s just one month. People expect continual innovation and improvement , and if you don’t deliver that to them, someone else will. It’s a different world we live in today, where the only constant is change. And if you aren’t staying ahead, you’re falling behind.

8. Fear of business failure

Business failure is one of the main , if not the biggest, fears of any business owner. If it weren’t for that fear, we wouldn’t even be asking, “ Why do businesses fail ?” However, as you develop your entrepreneurial and managerial skills, you will find that one of your greatest assets in running a successful business is overcoming your fear of business failure . Without minimizing the validity of your fears, you need to learn to view business failure as a learning opportunity rather than an insurmountable obstacle. Remember, life happens for you, not to you .

9. The wrong mindset

One of Tony Robbins’ central philosophies is that our mindsets create our realities ; what we believe influences what we are able to achieve. As entrepreneurs, when we embrace strategies for turning business failure into success, we transform our mindset from one of defeat into one of empowerment . And when we are empowered, a failing business is not the concluding chapter in our story; it is only the beginning. Don’t let your limiting beliefs disempower you. Instead, stay hungry in your search for success . Your hunger will inspire you and pay off in the end.

10. Lack of vision

Marketing guru Jay Abraham understands the question of why businesses fail. It’s a high-velocity and high-leverage mindset that prepares business owners to navigate the ever-changing seas of business. Rather than adapt your dreams to the economy, you must set and achieve your own goals, independent of circumstances. How can you accomplish this? By recognizing that business success hinges on loyalty to a vision .

11. Lack of passion

A passion-driven mindset lets you persist in honing your ethics and beliefs while learning from all the reasons why businesses fail . By adhering to your passions, you’re able to see your circumstances clearly – the positives and negatives. With this level of focus, you create an unstoppable drive to accomplish your goals. This focus allows you to take risks, acknowledging that feelings of doom and failure arise not from circumstances but from feeling stuck in the status quo. Don’t get stuck – persist.

12. Ineffective marketing strategies

Whether your company is large or small, marketing is the next critical step . Why do businesses fail in their operations? If you cannot find a way to market your product or service, then your business will have a hard time getting off the ground. Because the truth is, you could have the most innovative product or service, but the best product doesn’t always win. Do you think McDonald’s has the best burger? Probably not. But their marketing strategies are top-notch.

13. Not understanding your X factor

To market effectively and prevent business failure , you have to understand what your “X-factor” is . What are you here to deliver and how can you improve your customers’ lives? Take, for example, FedEx founder Fred Smith. Even in FedEx’s early stages when profits were slim, Smith invested in three market studies for testing the value expedited shipping would add to his product. Smith’s research paid off: He discovered his X factor and FedEx is now a household name, in large part due to its corner on the market via expedited shipping.

14. Asking the wrong questions

To help discover what your true value is as a business, go one step further and ask yourself the right questions . This includes core questions like: What does the marketplace need? Who is my customer? What can I do to make my company talkably different ? And perhaps one of the most important questions you can ask yourself is, “What business am I really in?” Let’s look at an example of a wildly successful company that needed to ask itself that very question: Apple.

How Apple came back from business failure

Today, everyone has heard of Apple. It’s one of the most valuable companies of our time, with a market cap of nearly $2 trillion and a stock that is soaring above its competitors. But it wasn’t always that way. Apple is actually the perfect example to look at when considering why businesses fail .

Apple’s founder Steve Jobs was fired from the company in 1985. Before re-hiring Jobs in 1997, the failing business operated at a loss and inched toward bankruptcy. In fact, Michael Dell was advising decision-makers to shut Apple down and give its shareholders their money back. But Apple persisted, and Steve Jobs asked himself one of the most critical questions in his lifetime: “What business are we really in?”

At first, the answer seemed obvious – Apple was in the computer business. But how were they supposed to win back customers when 97% of all computers across the United States were run by Microsoft?

That’s when they realized that no matter how good their product was, Microsoft was embedded and entrenched in the masses. After all, it was one of the main reasons Apple found itself in bankruptcy.

So Jobs asked, “What business do we need to be in?” And Apple decided that it needed to be in the business of connecting people to their passions – to their photographs, their music, to each other. When he did this, he avoided one of the top reasons why businesses fail : lack of flexibility.

Answering this question created one of the most life-altering shifts for Apple. The company transitioned into building basic, cool technology that connects people to what they love. Upon rehiring Jobs, the company arranged a partnership with Microsoft which signaled the company’s turnaround. When Apple launched the iMac just one year later, the firm returned to profitability and made its mark. Before long came the iPod and iTunes, then the iPhone. Their net sales soared. S ince that point Apple has never stopped innovating, and their marketing campaigns have propelled the company to an entirely new realm. Had Jobs viewed his firing as the death toll of his career (and company), the firm would have never experienced its revival.

Today, is Apple really in the computer business? Only 10.4 % of their business is computers, which means almost 90%  is not – the vast majority is made up of iPhone , iPad and Apple Watch sales. Honestly answering the question “ Why do businesses fail?” was vital for Apple to change course and become profitable.

If success is about innovation and marketing, then you have to decide who your customer is, what they need, what business you are in and what business you really need to be in. Answering these questions can change your entire business, because the answers will ultimately allow you to change your offer. As we say, change your offer, change your business – and change your business, change your life.

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How a great business plan will maximize your risk of failure

The business plan is a great execution tool. Yet, requiring a business plan during the early stages of idea development might maximize the risk of failure. Large organizations in particular still require business plans. That is an error. In this post we outline three reasons why companies should drop business plans in favor of a more rapid and iterative approach.

While business plans are less and less common in the startup world, they persist in large corporations. In large companies it’s not uncommon that a team of several people spends a couple of weeks developing a business plan. They will first spend time on market research. Then they will craft a detailed plan with an impressive financial spreadsheet looking 3-5 years ahead. Finally, all of this will be summarized in a beautiful slide deck to convince top leadership or investors of the brilliance of the idea.

Great business plans can look so good and have such convincing arguments that it becomes hard to doubt them. Unfortunately this false illusion of security may also maximize the risk of failure (or waste time and money at the very least). No company wants that. Let’s look at three reasons why requiring business plans is a bad idea.

1) Getting too granular too early = you risk wasting time

One of the dangers of writing a business plan is to spend too much time refining an idea before it is really proven. Unfortunately, “no business plan (however smart it looks) survives first contact with customers”, as Steve Blank the initiator of the Lean Startup movement likes to say.

Rather than refining an idea at the early stages, you should test it immediately and evolve it based on market feedback. Otherwise you risk wasting time working on refining an idea that nobody cares about. The problem is that you’ll only realize that much, much later. 

TIP: Keep your early ideas very rough (e.g. on one page with the Business Model and/or Value Proposition Canvas) and immediately test them. Gradually refine your ideas with increasing  evidence.

2) Selling an idea & plan to leadership or investors  = You risk getting locked-in

Where it starts getting dangerous is when a team sells their top leadership or investors a polished and refined business plan - before rigorously testing the underlying business model and value proposition(s) in the market.

When leadership or investors buy and finance a plan they expect that success is a mere execution problem. They expect that beautiful and detailed spreadsheet in the business plan to materialize exactly how you projected it. In other words, you just got locked into a plan that was entirely made up. You are forced to execute an idea that is yet to be proven. If you want to change direction later on, it will be difficult to convince leadership because you sold them something else.

TIP: Don't sell leadership a polished and refined business plan. Sell them an opportunity and a rigorous process that will turn your idea into an executable business model by producing market evidence. Show them how this approach will minimize the risk of failure, as opposed to a business plan which maximizes the risk of getting locked into one direction that is yet to be proven.

3) Hiring based on an idea & plan = you risk premature scaling

The biggest risk of business plans is that they may lead to premature scaling. This happens when you hire people and spend money on key resources based on a plan rather than market evidence. In other words, you get into "execution mode" before you fully finished the "search" for the right business model and value proposition(s). We wrote about this in a recent post on how Great Execution of Bad Ideas Kills Businesses . 

This type of premature scaling of great looking business plans can lead to enormous financial losses. My "favorite" examples are Flo TV by Qualcomm ($1+ billion loss) or  Better Place , a startup that aimed at getting people to use electric vehicles ($850 million loss).

TIP: Don't invest in execution until you have strong evidence that your idea will work. Otherwise you risk premature scaling and running out of money.

Burn your business plan before it burns you

At Strategyzer, we are no enemies of business plans if they are used purely for execution purposes. Unfortunately we've seen too much damage from business plans used during the early stages of idea development - particularly at large organizations.

There is no place for a business plan when you are still searching for the right business model and value proposition for your idea. It's simply the wrong tool for the task and it might even lead to maximizing your risk of failure.

Business plans should be replaced by a more dynamic approach until you have sufficient evidence that your idea will work. Only then should you consider crafting a business plan. Until then, we suggest you burn your business plan before it burns you.  

Does your organization still require business plans? What's the impact?

About the speakers

Dr. Alexander (Alex) Osterwalder is one of the world’s most influential innovation experts, a leading author, entrepreneur and in-demand speaker whose work has changed the way established companies do business and how new ventures get started.

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The Consequences of Not Having a Business Plan

• November 28, 2022
• Business plans

Failing to have a business plan could lead to huge consequences for your business. Read this blog to find out the disadvantages of not having a business plan.

What Is a Business Plan?

A business plan is the big-picture idea for your business. It’s usually recorded on an official document and covers your business goals and how you plan to reach them. There’s a wide range of types of business plans, some of which include:

• Opportunity
• Municipality or Non-Profit

While these business plans tackle different objectives, there are two elements that should exist in all of them: goals and strategy. Every business plan should have goals and overarching strategies that can help you reach them.

While business plans are most helpful for start-up businesses, they’re a valuable tool for every business owner interested in organizing their objectives.

There are some serious consequences to not having a business plan. Some of them include:

A Lack of Direction

A business plan ensures that everyone is on the same page and working towards a common, well-established goal. Without a detailed business plan, your business could become lacking in direction, wasting time and money on things that don’t matter as much to the success and longevity of your business. Goals can exist without a business plan, sure, but they’re probably not clearly quantified. A business plan helps you create specific, actionable goals that help you succeed.

A business plan will also encourage you to form a strategic plan for how to reach your goals. Strategy is as important as the goals themselves—and that’s why many businesses fail to execute. For example, you may have a goal to reach $5,000,000 in sales, but how exactly do you plan on reaching that? Many businesses set specific goals but never reach them due to poor planning. A business plan avoids this issue by establishing goals and a plan for implementing the strategies you need to reach them.

Missed Growth Opportunities

Another consequence of not having a business plan includes missed opportunities for growth. An effective business plan will identify the opportunities your business can use to succeed. This gives you an idea of what a successful trajectory looks like for your business and how you can get there. Failing to plan ahead means that every business process will have to be handled in the moment. This can lead to poor decision making (and an enormous amount of stress), and it also means that energy is focused on putting out fires instead of pursuing novel business ideas.

In today’s business environment, it can often feel like you need to innovate or fail. Businesses need to be constantly looking for new opportunities to survive. A business plan could give you the time to make sure that your business is conducting marketing analysis and identifying growth opportunities you can take advantage of.

• Wasted Resources

Business plans are designed to maximize your organizational efficiency. Not planning ahead of time will lead to your business making inefficient budgeting, inventory, and operational decisions. This leads to:

• Inaccurate Budgets and Financial Projections
• Disrupted Project Timelines
• Inventory Strain
• Operational Disruptions

The above failures could compromise your business’s overall financial security and turn away potential investors. Failing to secure investments could seriously compromise your business’s stability, especially if you’re dependent on maintaining consistent working capital.

Unclear Organizational Structure

A business plan also defines clear roles for staff. Organizational hierarchy is key to making sure that your business has an effective line of communication and a level of accountability that keeps everyone honest. Without a business plan in place, there can be confusion and important tasks that fall through the cracks.

Having clear structures in place also makes it easier for employees to get answers to critical questions. Have you ever worked in a business where you weren’t sure who to contact when you had work-stopping issues? If so, you know that these kinds of problems can lead to colossal wastes of time and efficiency. The average employee takes 23 minutes to recover from an interruption to their work . A business plan could keep these interruptions from happening.

Don’t Know Where To Start With a Business Plan?

Learn more about business plan options today.

Failing to Prepare is Preparing to Fail: A Case Study

To illustrate the consequences of not having a business plan, let’s examine what happened when a real-world business failed to prepare.

Borders is a name you may remember. Established in 1971, it was a national bookstore chain that found high levels of success for decades. Borders got comfortable coasting on their tried-and-true business model and weren’t innovating when new technologies began to change the retail landscape in the 2000s. Borders was forced to make a fast decision—or shut down.

They thought the answer to their struggling business was more volume. They tried opening up more stores across the country, thinking that they weren’t targeting the right locations. Unfortunately, this ended up being the wrong decision. They declared bankruptcy in 2011, being forced to close 399 stores and lay off 10,700 employees. Borders could have avoided this by planning ahead. Instead of being prepared for changes to the business environment, they were addressing issues as they came, and they ended up paying the consequences.

Partner With GreenGate for the Plan Your Business Needs

Still not sure where to start with creating your next business plan? GreenGate can help! We’ve helped found over 400 businesses in the United States, and we want you to be our next success. Contact us today to take your business to the next level.

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Why Business Plans Fail and Why Projects Fail

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Thousands of business plans are created every year and only a small fraction of these businesses will succeed. While these business plans may contain solid ideas, they fail for specific reasons and their creators are forced back to the drawing board. The same is true of projects within a company. Big plans are drawn up, ideas are conceived, but when it comes to the real world application of making the project work, it falls apart. If you understand some common reasons why business plans fail and why projects fail, you can be prepared to face these issues and surmount them.

Unachievable Goals and Aspirations

Setting high goals and having the best of intentions of making a business plan or a project work doesn’t always turn out well in the real world. While it is important to have lofty goals, the path to achieving these goals needs to be realistic and attainable. It is one thing to want to sell a million gadgets; it is quite another to market those gadgets to the public and have them actually sell. In order to have a business plan or a project succeed, it is necessary to have achievable goals and aspirations that can be met, ideally within the first year or first few months of operation. If you have a lofty goal, that doesn’t mean you have to scrap your plan – just that you need to set attainable goals along the way and be realistic with your planning.

Lack of Market Research

Market research is a vital part of starting a new business or project. If you don’t fully understand the competition and the current situation of your marketplace, you don’t have enough information to go forward. Before a business plan is drawn up or a project is begun, thorough market research needs to take place and the results need to be viewed realistically. If your niche is saturated, then you need to come up with a plan that will set your business or project apart and help it succeed. Otherwise, your voice will simply be drowned out in the crowd or never heard because there just isn’t a market for it.

Productivity and Motivation Issues

Entrepreneurs are known for their ambition and their drive to succeed. It is these two points that can turn someone without a cent to their name into a multi-millionaire. But along the way determination to succeed, and the ability to stay motivated even when the tide is turned against you, are vital to success in the business world. This motivation needs to extend to employees of your business or members of your team on a project. If they are not productive and motivated, the best idea in the world will not succeed.

Improper Budgeting

Lack of real world budgeting is another important reason why business plans fail and why projects fail. You won’t always be able to go to the bank for another loan to get your business or project off the ground. Eventually, your funding may dry up if you cannot get your idea going in the right direction. Research needs to be conducted ahead of time on the approximate cost of starting a business or a project and keeping it running through the first year and through growing pains. Funding sources need to be found ahead of time and eventualities need to be planned for before you get in too deep.

• Coley Consulting: Why Projects Fail
• Maryland Small Business Development Center Network: Why Business Plans Fail

Kate McFarlin is a licensed insurance agent with extensive experience in covering topics related to marketing, small business, personal finance and home improvement. She began her career as a Web designer and also specializes in audio/video mixing and design.

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Vidhu Vinod Chopra Talks Bollywood Sleeper Hit ’12th Fail,’ Plans China Release: ‘In Every Market Where There Is Struggle, the Film Will Do Well’ (EXCLUSIVE)

By Naman Ramachandran

Naman Ramachandran

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For veteran Bollywood filmmaker Vidhu Vinod Chopra , his latest film “ 12th Fail ” is the gift that keeps on giving.

Based on the 2019 book of the same name by Anurag Pathak, the film tells the true story of Manoj Kumar Sharma who conquered extreme familial poverty to pass one of the world’s toughest examination processes and become an Indian Police Service officer.

The film struck a chord with audiences and has grossed $8.5 million to date, more than three times its budget. “Each film has its own God, and it’s always a mystery what that God does for that movie. So it’ll always remain a mystery to me as to why it did as well as it did,” Chopra told Variety . “For me, all I can say is perhaps because it’s an honest film, made with honesty and it propagates honesty… and in today’s world, honesty is really in short, short supply. So, perhaps because of that, it connected with so many people, but frankly I don’t have an answer for it. It’ll always remain a mystery.”

“12th Fail” also gave Bollywood filmmakers hope that smaller films with a focus on story rather than spectacle could work at the box office, something that was mostly limited to films hailing from the south of India. The film bowed on streamer Disney+ Hotstar in India and worldwide excluding India on Netflix in late December 2023 and on Sony’s Indian television channels in February 2024. In January 2024, it won best film, director, screenplay and editing at India’s Filmfare Awards, with Massey winning the critics’ award for best actor.

A directing graduate of the Film and Television Institute of India, Chopra won acclaim for his student short “Murder at Monkey Hill” (1976). His next short, “An Encounter With Faces” (1976), was Oscar nominated in the documentary short subject category. He adapted “Murder at Monkey Hill” as his feature debut “Sazaye Maut” (1981). Highlights of his directorial career include “Khamosh” (1985), “Parinda” (1989), “1942: A Love Story” (1994) and “Mission Kashmir” (2000).

Chopra is also an enormously successful producer with credits including “Munna Bhai MBBS” (2003), “Parineeta” (2005), “Lage Raho Munna Bhai” (2006) and “Sanju” (2018). His “3 Idiots” (2009) and “PK” (2014), in addition to being blockbusters in India, were hits in China as well.

Plans are afoot to release “12th Fail” in China. In January, the film played at the first edition of Festival of Young Cinema (Asia-Europe) in Macau, spearheaded by veteran film festival curator and director Marco Mueller.

“We are releasing in China in a big way this year,” Chopra said. “I was invited to Macau by Marco Mueller for the Asia-Europe Young Cinema film festival. We had a standing ovation in China. And for me that was very gratifying. There were Hindi dialogues, and I of course couldn’t read the subtitles in Chinese. But the way people were clapping, the audience’s reaction was incredible. I have no doubt that this film will do very well. Not only in China, but in every market where there is struggle… where, like in the movie, there is a big government job that you can get through exams and then that changes your life. Where that one exam changes your life forever. Wherever that is… of course in China, in Korea… wherever that is, the film will do very well, because the people will relate to the struggle of the protagonist.” The China distributor has not been revealed yet.

Chopra is currently working on three projects. “I’m just going to make movies all my life till I’m alive, and hopefully those movies will find their place everywhere, in cinema halls, on streaming platforms, wherever. I’m not interested in the business of cinema. I’ve never been,” Chopra said. “It’s a contradiction because I’ve made some of the biggest hits in India, but for me cinema is such fun. And I’m not highly educated, I wasn’t fortunate enough to go to Stanford, like my daughter. So I just want to keep making movies till I can. I’m 71. I’m hoping to continue making movies till I’m 100 years old. My inspiration in that is of course Clint Eastwood. But that’s all I want to do. Make movies.”

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Trump's coming stock bust

If you want to know how Trump Media will do, look at the right-wing SPACs that came before it.

Donald Trump's newly public social-media company is not the next Nvidia — or Meta or Google or whatever has happened with X/Twitter .

The share price of Trump Media and Technology Group, trading under the stock ticker DJT (because of course it is), surged following the completion of its SPAC merger last week. A SPAC, or a special-purpose acquisition company, is a shell company — in this case, Digital World Acquisition — that goes public with the intention of buying an actual company later. For a while, TMTG's market cap was in the $9 billion range, making it more valuable than Etsy and Hasbro. That bumped up the former president's net worth to $7 billion, though not in a way he can immediately take advantage of. Unless the company's board says otherwise, Trump can't sell his shares for six months.

If I were Trump, though, I would cajole the board to speed up that lockup period so I could cash in. It seems, let's say, unlikely that his media company's stock price is going to stay so high forever. (It seems like investors agree — on Monday, after this story was first published, the stock tumbled by more than 25%.)

For one thing, TMTG, which owns the conservative Twitter copycat Truth Social, makes basically nothing. According to a new financial filing from the company released on Monday, its total revenue was $4.1 million in 2023. Extrapolate that out, and the stock is trading at something like 2,000 times the company's annual revenue. That is, um, high. Apple, for example, trades at about seven times its total revenue. And given TMTG's paltry revenue, it actually lost $58 million last year.

Trump's company says it has bigger plans ahead, such as growing Truth Social and developing "one or more additional cutting-edge products and/or services" to complement Truth, including some sort of video-streaming situation that "provides a 'home' for cancelled content creators." What exactly this might look like, or how many people would flock to it, isn't clear.

Truth Social had an estimated 5 million monthly website visits in February of this year, according to third-party trackers, but the company isn't revealing exact metrics right now. By comparison, Facebook had 845 million monthly active users when it went public in 2012, and Twitter had 215 million when it IPO'd the following year. The long and the short of it is that TMTG is not a thriving business.

But maybe other social-media outlets, which are designed to appeal to the widest possible base, aren't the right comparison. Truth Social and any other business Trump Media and Technology Group spins up is pretty much guaranteed to appeal just to Trump fans.

Trump's media company isn't the first conservative outfit to go public via SPAC in recent years and try to make money off of right-leaning consumers and investors . Its predecessors have not done so hot. Rumble, a Peter Thiel-backed YouTube for the right, rose by some 40% on its first day of trading in September 2022 and has been hanging well below that ever since. Both Black Rifle Coffee, a Starbucks for Republicans, and Public Square, the GOP's supposed alternative to Amazon, have followed similar trajectories: a stock pop early on, then sitting under $10 ever since. None of them have achieved sustained profitability, though Black Rifle says it's on the path to it.

I'd guess Trump has much better odds of winning the White House (or ending up with some criminal convictions) than he does seeing his mediocre social-media company take off.

Being in the business of anti-woke is not especially lucrative. As much as people say they want to shop and invest their values, it often doesn't turn out to be the case. Instead, most people opt for the convenient option and whatever they're most used to doing already. There's a reason most boycotts don't work — people are busy and tired. It's true on the left as well. Dig deep enough, and every company in the world can probably give you a reason not to want to give them your money.

Might Trump and Truth Social be different, at least on the stock front? I mean, I suppose anything is possible. As my colleague Peter Kafka points out, investors aren't shorting the stock en masse yet , in part because doing so is hard and in part because you can see DJT taking off with the meme-stock crowd. GameStop and AMC weren't doing particularly awesome from a business sense when they achieved meme status, yet small-time investors were eager to pile into them. For a good chunk of the country, tossing some cash into Trump's company is not only a way to stick it to The Man but also to The Woke Man. Trump has also spent years insisting that his literal name is worth a ton of money, and I guess we're about to find out just how much.

Still, I'd guess Trump has much better odds of winning the White House (or ending up with some criminal convictions) than he does seeing his mediocre social-media company take off. He might want to call up someone on TMTG's board — say, his son Don Jr. — and see about them getting a meeting on the books to let him start offloading shares sooner rather than later.

Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.

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IR-2024-88, April 2, 2024

WASHINGTON — With the April 15 tax deadline approaching, the IRS reminds taxpayers there is still time file their federal income tax return electronically and request direct deposit.

Filing electronically reduces tax return errors as tax software does the calculations, flags common errors and prompts taxpayers for missing information. Most people qualify for electronic filing at no cost and, when they choose direct deposit, receive their refund within 21 days.

Free electronic filing options

Taxpayers with income of $79,000 or less in 2023 can use IRS Free File guided tax software now through Oct 15. IRS Free Fillable forms , a part of this program, is available at no cost to taxpayers of any income level and provides electronic forms for people to fill out and e-file themselves.

IRS Direct File is now open to all eligible taxpayers in 12 pilot states to decide if it is the right option for them to file their 2023 federal tax returns online, for free, directly with the IRS. Go to the Direct File website for more information about Direct File pilot eligibility and the 12 participating states.

Through a network of community partnerships, the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs offer free tax return preparation to eligible people in the community by IRS certified volunteers.

MilTax , a Department of Defense program, generally offers free return preparation and electronic filing software for federal income tax returns and up to three state income tax returns for all military members, and some veterans, with no income limit.

Use Where's My Refund? to check refund status

The Where's My Refund? tool will normally show a refund status within 24 hours after e-filing a 2023 tax return, three to four days after e-filing a 2021 or 2022 return and four weeks after filing a tax return by mail. To use the tool, taxpayers need their Social Security number, filing status and exact refund amount. Taxpayers can also check Where's My Refund? by downloading our free mobile app, IRS2Go , from an iPhone or Android device. The tool updates once a day, so people don't need to check more often.

Taxpayers that owe on their tax return

IRS reminds people they can avoid paying interest and some penalties by filing their tax return and, if they have a balance due, paying the total amount due by the tax deadline of Monday, April 15. For residents of Maine or Massachusetts, the tax deadline is Wednesday, April 17, due to Patriot’s Day and Emancipation Day holidays.

Payment options for individuals to pay in full

The IRS offers various options for taxpayers who are making tax payments :

• Direct Pay – Make a payment directly from a checking or savings account without any fees or registration.
• Pay with debit card, credit card or digital wallet – Make a payment directly from a debit card, credit card or digital wallet. Processing fees are paid to the payment processors. The IRS doesn’t receive any fees for these payments. Authorized card processors and phone numbers are available at IRS.gov/payments . 
• Electronic Federal Tax Payment System (EFTPS) – This free service gives taxpayers a safe, convenient way to pay individual and business taxes by phone or online. To enroll and for more information, taxpayers can call 800-555-4477 or visit eftps.gov .
• Electronic funds withdrawal – Taxpayers can file and pay electronically from their bank account when using tax preparation software or a tax professional. This option is free and only available when electronically filing a tax return.
• Check or money order  – Payments made by check or money order should be made payable to the “United States Treasury.”
• Cash  – Make a cash payment through a retail partner and other methods. The IRS urges taxpayers choosing this option to start early because it involves a four-step process. Details, including answers to frequently asked questions, are at IRS.gov/paywithcash .

Payment options for individuals unable to pay their taxes in full

Taxpayers that are unable to pay in full by the tax deadline, should pay what they can now and apply for an online payment plan . They can receive an immediate response of payment plan acceptance or denial without calling or writing to the IRS. Online payment plan options include:

• Short-term payment plan – The total balance owed is less than $100,000 in combined tax, penalties and interest. Additional time of up to 180 days to pay the balance in full.
• Long-term payment plan – The total balance owed is less than $50,000 in combined tax, penalties and interest. Pay in monthly payments for up to 72 months. Payments may be set up using direct debit (automatic bank withdraw) which eliminates the need to send in a payment each month, saving postage costs and reducing the chance of default. For balances between $25,000 and $50,000, direct debit is required.

Though interest and late-payment penalties continue to accrue on any unpaid taxes after April 15, the failure to pay penalty is cut in half while an installment agreement is in effect. Find more information about the costs of payment plans on the IRS’ Additional information on payment plans webpage.

Unable to file by the April 15 deadline?

Individuals unable to file their tax return by the tax deadline can apply for a tax-filing extension in the following ways:

• Individual tax filers, regardless of income, can electronically request an automatic tax-filing extension through IRS Free File by filing a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return PDF .
• Make an electronic payment using Direct Pay, debit card, credit card or digital wallet and indicate the payment is for an extension.
• Mail Form 4868 by the tax deadline.

Things people should know when requesting a tax-filing extension:

• Tax-filing extension requests are due by the tax deadline date, and it does not give an extension of time to pay the taxes.
• Avoid some penalties by estimating and paying the tax due by the tax deadline.
• Special rules for tax deadlines and automatic tax-filing extensions may apply for taxpayers serving in a combat zone or qualified hazardous duty areas , living outside the United States , and people living in certain disaster areas . They may not need to submit a tax-filing extension; however, people should check to see if they qualify before the tax deadline.

Use IRS.gov for the quickest and easiest information

Taxpayers can visit IRS.gov 24 hours a day for answers to tax questions , more tips and resources by visiting the Let us help you page.

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