Why Do Many New Businesses Fail?

One of the main reasons of new business start-ups failure is the inability to appropriately define the market, and the lack of relevant market segmentation for core market segments and customer groups.

Market segmentation involves dividing the market into smaller homogeneous groups as a part of the company’s overall marketing strategy.

Proper market segmentation entails dividing the market based on several factors which are geographics, demographics, customer behavior, psychographics, and geodemographics: which means dividing the market into segments using a combination of demographics and geographical data.

The major outcome of poor market segmentation is the false determination of your target market and target customers; consequently you will find yourself trying to market a commodity or a service to the wrong customers.

Another key reason is inefficient demand forecast and inexact estimation of customer needs and preferences which will lead to excess supply which will eventually result in financial problems


New businesses could also fail because of setting unrealistic or unclear goals, and that’s a big problem really because as a new entrepreneur you should know exactly what your capabilities are and what is achievable and what is not and subsequently setting your goals.


Thus, if your goals are unclear or unrealistic it will be almost impossible to achieve and that will tear the business apart.

That will lead to another point, you may set specific goals thinking they are theoretically feasible but in the real world it is not true simply owing to not realizing the gap between hopes and the market realities.

A focal point of why many new start-ups fail is selecting inappropriate location for the business.

Especially for offline business, carefully choosing your business location will enable you to fully exploit the business opportunity.

Other reasons that may cause new business start-ups failure include inadequate financial planning, failure to attract target customers, management incompetency, lack of business scalability and ineffective business planning



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