If you’re starting a business, you may be wondering how many businesses fail either in the short-term or the long run. Unfortunately, business failure is common: About 20% of small businesses fail in their first year, and a staggering 96% of businesses will fail over a 10-year period of time. As for the remaining 4%, it does not necessarily mean they succeed – it means that they’ve survived.
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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, you can truly envision how to succeed.
Too many leaders still see executive coaching for professionals as a crutch—as something you turn to only when you're burned out, stuck, or your business is bleeding cash.
The systems that worked for past generations won't take you where you want to go. As any executive business coach will tell you, today's leaders are busier than ever, working longer hours, crossing off endless tasks, yet feeling no closer to the life or business they envisioned. [...]
If you're always the smartest, most driven person in the room, it might feel good, but you're stagnating. Growth doesn't come from comfort. It comes from challenging yourself.
It's no secret that most new businesses fail within the first 10 years. It's easy to blame this on dips and slumps in the economy. But economic winters don't kill businesses; lack of preparation does.
So why do some leaders explode with results while others stay stuck, even with access to the same information? The difference is simple: application and accountability. And coaching is the bridge to both.
“If you fall in love with your product instead of your customer, you’re on the path to failure.” —Tony Robbins
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.
“It’s not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change.” —Tony Robbins
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.
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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.
“Effective marketing is not optional; it’s the difference between business survival and business failure.” —Tony Robbins
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.
“The price of ignorance in business is obsolescence. Obsolescence in business in short order means extinction.” —Tony Robbins
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.
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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. Since 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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Business failure may be common, but it is never inevitable. Every reason why businesses fail is also an opportunity to rise stronger—through preparation, strategic clarity, and relentless adaptability.
The stories of Apple, Steve Jobs, and countless entrepreneurs show us that agility, innovation, and deep customer focus transform not only companies but lives. Success demands asking the right questions, embracing change, knowing your purpose, and relentlessly pursuing excellence with passion and vision.
Remember, your business is more than profits—it’s a vehicle for impact, connection, and expression of your highest self. When you commit to mastering the essentials—leadership, strategy, and mindset—you don’t just survive the market, you shape it.
Take this knowledge as your compass and fuel. Don’t fear failure—learn from it. Don’t cling to what’s comfortable—adapt. Your breakthrough is waiting just past the commitment to act differently and lead boldly.
Your business, your future, your legacy—own it like the champion you are destined to become.
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