Why Most Small Scale Businesses Go Bankrupt Before Ten Years

Statistics show that 90% of all new small scale businesses fail within the first five years. Statistics also show that 90% of the 10% that survive the first five years fail before their tenth anniversary.

In other words, approximately 99% of all startup businesses fail within ten years.”

These words were facts coined from best-selling author Robert Kiyosaki in his book, “why A students work for C students.” 

These are facts already laid down by big-time business magazines like Forbes. This analysis shows that most businesses that would arise in our world today are already bound to fail.

There is no such thing as fate preordained it, nothing ever happens without a reason, though luck plays a very minor role in our life plans.

This means that, if businesses fail at this rate, the entrepreneurs were getting something wrong through the life course of such businesses.

Mind you, as an entrepreneur, it is quite normal to fail a number of times but, this should not make you give up and roll on your back each time harsh life rubs your tummy.

Instead, you should analyze your mistake, learn from it and work on it. This is going to be our major focus in this article. 

Where do small scale entrepreneurs go wrong, and could most failures just be attributed to chance? 

Unwanted services

Who wants to procure what they don’t like? The answer to that is as plain as daylight, “nobody.”

Entrepreneurs sometimes make this huge mistake. Before you think of starting up a business, you should at least do your research properly.

The product you plan to sell to the public should not just be enticing enough to you, but should also be something that could create a wide demand among the greater masses.

If the service you provide can’t appeal to a large consumer base, be sure to close your company in little or no time.

Consumers are the key to a successful enterprise. If you can’t gather enough consumers for your services, automatically, you will never have enough funds to keep your business running.

The customer base is always necessary within the first few years of a business because you haven’t made a name yet. So, you have to pull your weight in ensuring that what you have to offer is a necessity in their lives.

At this point, you can’t afford to make a mistake in inventing something that doesn’t matter, so do enough research as to services that could get the attention of a lot of people.

It should also be an idea that tastes great and could ease people’s life a lot too because most people try to alleviate the difficulty in their lives. 

Whatever your startup should be able to create a lot of demand because demand creates supply and supply creates funds. Funds keep the business running.

Poor record-keeping

This is common to small business owners. They feel the business is at its starting point, and being a small scale business, there is no harm in ignoring minor records and events.

This is a really wrong notion. If anything at all, the starting point of your business should be monitored like a lion watching prey.

Notes should be taken regularly and sales should be scoped from a bird’s eye view (monitored really closely).

It is at this point that mistakes are corrected, and lazy products (products that no more appeal to consumers) are removed in other to save costs and bring inactive ones.

An entrepreneur who keeps regular and advanced records knows which parts of their business to concentrate upon and device positive changes to keep the business going.


Ever heard the saying, “patience is a virtue,” this is real and could be applied in our real-life scenarios. Everybody wants to get rich quick, but this ‘get rich quick’ scheme does not normally work.

Not everyone gets to be as lucky as the inventor of Facebook, Mark Zuckerberg, and get super rich in about four years of starting up. You have to be patient and nature your small scale business until it grows into a large scale.

One common thing entrepreneurs fail to acknowledge too is that all businesses have their ups and downs. This means, there may come a time when your small scale business may hit turbulent waves.

This could be as a result of various factors ranging from economic meltdown to poor management. It doesn’t necessarily mean the business is bound to fail. During times like this, patience is needed, and insight to detect faults too.

But, as the case may be, most entrepreneurs decide to tuck tails between their legs and run off like defeated dogs.

Shaky times doesn’t mean the end of the road, even the almighty tech giant apple inc, faced its own tribulations, but better management and innovative ideas brought them back to their feet, now look at them, worth over a trillion dollars. Believe it or not, Apple started off in a garage with no more than seven individuals.

Poor Adaptation

What does it mean to adapt? The word ‘adapt‘ has been used in biology to indicate a survival instinct in organisms. Adaptation is the ability of one to adjust to recent environmental conditions in order to survive.

The ability of a small scale business to adapt to changes in society is highly required for survival. Therefore, for such startups to thrive, both the business and it’s owners must be flexible.

Most ideas have periods when they start to get boring and need a spice up. This spice up should be carefully thought off and executed properly. Time and periods play a role to test one’s adaptive instinct too.

For instance, you founded a newspaper company in the ’80s, back then the paper was the way news and information passed across, then the ’90s ushered in the digital age till date, failure to move from the paper to the digital era, brings in a lag in the amount of revenue you are snagging in.

A more business inclined individual would look for the midpoint to balance the number of papers being printed, and the digitally uploaded news because, some of it’s older acquaintances, may still prefer to read the papers. Now, this is the real example of flexibility, they keep the papers for the old folks and the online news for the younger generation. Genius right?


Competition is present in all walks of life. Plants compete with each other for nutrients, animals compete with each other for food, even humans compete with each other to know who’s better.

Now, why won’t businesses compete with each other for productivity and customers? The moment entrepreneurs accept the fact that the competition is going to be brutal and ruthless, the more prepared they would be to keep their businesses in the long run.

Competition is not something to be scared of but should be welcomed. It brings out the best in our services, and good services get us life long customers. If a business can’t grow as fast as it’s competitors, it gets left behind and closes.

Therefore, small business owners should be innovative and think outside the box, especially when the competitor is a bigger company. One important fact to note is that you never copy your competition, but try to invent an idea of yours that could be more authentic and original than that of your competition.

Also, the lag period of your products or idea should be known. The lag period is the time taken to think of a new idea and bring it into reality. So, it’s more like time taken for a new update.

This could help a small scale owner to keep pace with the ever-changing market. For instance, the lag period for technology is eighteen months, so if you are into let’s say, the phone production sector, you should have new products available every eighteen months. Competitors instead of getting you down should fuel your desire to grow.


There could be more reasons for this failure but, I just listed what I felt where most common and put in a word of advice for small scale entrepreneurs too. You could go through your own observations and research, then try to figure out a lesson or two to learn. It could go a long way to help you on your journey as a small business owner.

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