6 Reasons why some small businesses fail  

It takes guts and gumption to run your own business, a career move that many deem as risky. To navigate the world of business you need to have the ability to mitigate risks, provide your product or service to the market while trying to make a profit- a juggling act that’s not for the faint hearted. 

 Unfortunately for many small business owners, the reality of running their own small business is a short-lived dream, with things not going to plan and shutting up shop a lot earlier than planned. 

To avoid becoming another statistic, we’ve gathered together some of the reasons why some businesses fail and tips which might help  your business stay sustainable for the future.** 

Potential Money issues 

Financial problems can be  a common hurdle that many small business owners face in their journey, with things like a lack of funding or working capital possibly being to blame. . 

One way to try and prevent experiencing financial dramas is by being in-tune and aware of what  financial responsibilities are required   in order to maintain a successful business operation.  

Turning a blind-eye or having little to no understanding of what is  required by a small business can sometimes be a recipe for disaster. 

Having a chat to a financial expert like an accountant, business banker or financial advisor can help  businesses establish a financial roadmap for the journey ahead.  

The price might not be right 

For many businesses missing the mark when it comes to pricing their products and services can potentially cause a downward spiral. If  a business operates within an overly competitive industry, it can be tempting to price a product or service well below its worth than similar offerings in the market just to drive the customers through the door.  However, this may not be sustainable long term.   

Insufficient management 

Running your own business involves wearing many hats and managing many different aspects of the business. From the moment you hit the ground running, having strong leadership and management skills are crucial to the successful running of a small business. 

Without having a dedicated management team or someone with the skills to steer the ship, businesses often find themselves struggling to stay afloat. Areas of the business like, finance, sales and marketing can become poorly managed leading the business into areas of trouble.Outsourcing might be a good option for areas where  you don’t have the knowledge or skills. 

There are plenty of resources available to assist with hiring the right people to do a variety of jobs from digital marketing to accounting, payroll and virtual assistant for example. 

Poor planning 

Ineffective business planning can potentially have a catastrophic impact on the running of a small business. It is something that businesses should consider having in place before the doors open, but unfortunately is something that is sometimes given little or no thought. 

When creating a business plan you might consider including the following action items: 

  • A clear description of what your business is what it is you do 
  • Understanding the future needs of management and staff 
  • A Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis of your businesses position 
  • Seeking advice on the business’ financials 

Once you have a plan, you may wish to revisit it and make changes accordingly, especially as it starts to grow. The initial plan you create for your business is possibly not going to have the same details and goals than, say, 12months down the track. 


Mismanaged marketing  

Marketing is sometimes an area of business that isn’t given the love it needs. After all, if you’re not driving customers to your business how is it going to generate sales and turn a profit? Without a bit of planning and investment in getting your brand out there, your business could be missing out on the opportunities it needs to thrive in the marketplace. 

If this isn’t an area of your business that you have the skills or know-how in consider hiring external help. There’s an abundance of digital marketers out there who can support and create marketing plans and strategies to help boost your business.  

Not being insured 

Ensuring that your business is safe and secure is part of every solid risk management plan, something that you should consider having in place if you want to be in business for the long run. This is where business insurance can play a vital role in safeguarding your small business.  


If a claim were to occur and you didn’t have business insurance in place, the impact could be devastating. Not only are your business’ financials and reputation on the line, but you could also see your personal assets in jeopardy of being lost to cover the associated legal fees and compensation. 

Different businesses will be exposed to varying kinds of risks and can range from anything from a customer potentially tripping over an item at your business premises, or having your tools of trade stolen for example.  


Regardless of the type of business you are running, there are a variety of different types of cover that can help safeguard your hard-earned business.  


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


Public Liability insurance*  

Professional Indemnity insurance 

Business Insurance*  

Building insurance*  

Contents insurance*  

Business Interruption insurance*  

Portable Equipment insurance*  

Cyber Liability insurance*  

Don’t leave it chance, start protecting your business today with BizCover. We provide hassle-free business insurance options to protect your business from unwanted challenges. Visit us online or give us a call to receive multiple quotes from some of New Zealand’s leading insurers. Compare quotes, select your policy and get covered in minutes.  

*As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this web page is general only and should not be relied upon as advice.  

**This information is a general guide only and does not take into account your objectives, financial situation or needs.

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