Owning It: Small Business

11 common reasons small businesses fail

Entrepreneurs: Their own worst enemy

Abel Mitja Varela | E+ | Getty Images

Most entrepreneurs charge into the marketplace with high hopes of success, but many face crushing disappointment when their businesses fail. In fact, the number of small-business exits exceeded the number of start-ups for the first time this year. While 400,000 new businesses are being created annually, 470,000 are closing, leaving a deficit of 70,000, according to the U.S. Census Bureau.

Not all business exits are failures—sometimes an owner gets a job or retires—but some of them undoubtedly are. And often it's because the owners got blindsided by factors they did not anticipate.

"A lot of companies fail unexpectedly," said attorney Andrew Sherman, a partner at Jones Day in Washington, D.C., who advises businesses on issues affecting growth and strategy. "They fail by surprise; they don't have any safety belt."

The good news? "A lot of risks can be averted, but only if you plan for them," Sherman said.

The first step in learning to avoid business failure is understanding what is likely to cause it. Here are 11 common reasons businesses go under.

—By Elaine Pofeldt
Posted 30 July 2014

Empty pockets