The Real Reasons Why Businesses Fail

By Natalie Pike,
March 3, 2015

Brace yourself for a tough reality check. 

According to Bloomberg, a business and market news source, 8 out of 10 entrepreneurs who start a business fail within the first 18 months. In other words, 80% of companies crash and burn. But why? There has to be a method for the madness. At the surface, the most common reason for the demise of startups is that they simply run out of cash. However, the issues that lead up to the financial collapse start well before. 

Mark Cuban, serial entrepreneur and owner of the Dallas Mavericks, said “When it comes to business it’s not about being tough enough – it’s about doing the work. It’s about being prepared. It’s about putting yourself in your customer’s shoes to understand what they want. It’s about always reiterating everything, knowing that someone is out there trying to take that business from you. Someone is trying to compete for your customers. Companies don’t fail because of a lack of money or attitude. Companies fail because of a lack of brains and effort.” 

The lessons Cuban has learned from his business failures are what motivate him the most.  ‘You can take your energy and apply it to being mad or you can go to work. The best revenge is success and doing it right,’ he said. 

Cuban has one main reason why businesses fail, however a recent article in Forbes says there are five more. 

Five other reasons 80% of companies crash. 

1. Not really in touch with customers through deep dialogue

2. No real differentiation in the market (lack of unique value propositions)

3. Failure to communicate value propositions in clear, concise and compelling fashion

4. Leadership breakdown at the top (founder dysfunction)

5. Inability to nail a profitable business model with proven revenue streams

The combination of both Forbes’ and Mark Cuban’s reasons companies die should give you the ultimate platform to build a successful company. Get your mind off the money and focus on relationships, communication, your brain, and your efforts. Before you know it, you’ll be the next billion-dollar entrepreneur. 

Running a successful company isn’t only up to you and your leadership skills. It also involves hiring a great team. Don’t continue down the path of mistakes. Read what most managers are doing wrong in our free eBook. 

About the Author

Natalie is the Marketing Strategist, responsible for knowing the ins and outs of the SMB Industry, educating prospects on hiring best practices and positioning Hireology as a thought leader in the SMB space. She started at Hireology in 2014, writing blogs, planning events and managing the various social media platforms. Prior to working in the “real world,” she attended Purdue University (Boiler Up!) majoring in Broadcast Communications and competing on the Women’s Water Polo Team.

Subscribe to our weekly newsletter and learn how to build your best team.