10 Mistakes That Can Bring Down Your Business

Mistakes of entrepreneurs. Image from www.cnbc.com

Most people are green when they start their first business. They will most likely learn on the job. As a result, mistakes will be made. It is highly unlikely that a business will become big without one or two mistakes. As a matter of fact, businesses (and their owners) will make many mistakes. By the time a business fails, entrepreneurs will have made several mistakes because a business almost never fails because of one mistake.

Mistakes of entrepreneurs. Image from www.cnbc.com
Mistakes of entrepreneurs. Image from www.cnbc.com

Successful entrepreneurs make mistakes too. Making mistakes is not the problem rather being unaware of the mistakes made is what makes most businesses go under. The unfortunate thing is that most entrepreneurs normally have no clue of the magnitude of their mistakes until it is too late. If you are going to succeed in business, you have to develop an awareness about mistakes because the most successful entrepreneurs are those that learn from mistakes (whether theirs or other entrepreneurs’ mistakes).

Here are some of the common mistakes that entrepreneurs should be wary of:


It is always a good thing when a business grows and needs to expand. However, sometimes the owners may expand at a much faster rate than the business has grown; get into areas that are not as profitable and experiencing growing pains that may damage the business. Growth in itself is not bad, but it should be controlled so that it does not lead to losses.


The market is what will determine the sales and revenues and ultimately the profits. Any type of business must know its target market or it is going to fail. If for example one is to open a pork butchery in say Eastleigh where the majority of the population is Muslim and who do not consume pork products. What are the odds of the business succeeding?

Reason for Starting

The reasons why someone will start a business will determine its success or failure. While most people will start businesses to get money, that should not be the main reason. The main reason should be a passion and love for what you are doing. Bill Gates started Microsoft because he had a passion for computers. The same can be said of Mark Zuckerberg and Facebook. These billionaires did not set out to make money, but they started something they were passionate about and money followed.

Insufficient Planning

Planning is very important in business. A business plan needs not to be 50 pages long with difficult business vocabulary. Instead, get a simple document to begin with that will show the strategy of the business. The business plan/ strategy will change as the business grows and goals are attained. At the very least, it should include:

• Description of the business;
• Measurable goals for the business;
• Analysis of the competition;
• Marketing plan; and
• Budget and cash flow projections.

Not Asking for Help

Most people will possess expertise in a certain area and that area will most likely form their core business. However, in the course of running a business, one will probably need expertise in an area he is not well versed in. Most people will delay asking for professional help as much as possible until – sometimes – it is too late. New business owners will lack relevant business and management expertise in areas such as finance, purchasing, selling, hiring and managing employees, production, law etc. Unless they recognize where they are not good at and seek help, the businesses may collapse.

Insufficient Capital

Any business should have sufficient operating funds. It is always important to know how much money a business will require and this includes the cost of staying afloat. Most businesses will go through cycles. At some point, something will happen that will affect the business negatively. It could be the loss of a major client or important customer, the arrival of a new competitor in the market, or the economy going down such that people do not have much money to spend on the goods and services one sells. If one is not adequately prepared for these unforeseeable circumstances, the business may not survive.

Borrowing too much

The reason for borrowing is always to take the business to the next level. An entrepreneur will estimate that the rate of return (or return on investment) if production is doubled will be 50% and so he can take a loan whose interest is 17% and still be profitable. However, a huge loan means more interest to be paid and if the rate of return is less than the interest on the loan, then it would not be a good idea to take the loan.

Low Pricing

So you are in a competitive field and decide the best way to get customers is by offering goods and services at low prices. It may work, but it will not be sustainable. The ideal situation is to introduce your business with the low prices as offers, get customers to sample the products then sell the products at competitive prices when the offer is done. Charging low so you can get ‘little money’ rather than ‘no money’ is often a recipe for disaster.

Failure to change with the times

Technology is a wonderful thing, but tell that to Kodak! Business owners should evolve with the times. Failure to do so will render the goods and services one deals in useless. Twenty years ago, the mode of communication within businesses was by post. Not anymore. Communication is now on email. Not long ago, most movies were on VHS. Anyone who had a VHS library or shop that did not move to DVDs does not have a business as we speak. Technology ensures that cheaper and efficient ways of production are invented every day and if one does not change with the time, they will lose customers as their products will be overpriced and of low quality.


There are a number of ways one can overspend on a business. Examples include large office space, too much inventory, hiring too many people or paying high wages or taking an expensive loan. All these will add to the expenses and reduce profitability and hence bring the business down.

These are just a few ways that can make a business fail. There are many more ways that a business can fail. Do you know of any that I have not mentioned? Let me know in the comments section.

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