For most businesses, there is only one reason why they don’t succeed – lack of funds. With no money, businesses cannot operate. However, there are numerous reasons why companies run out of money and it can be complicated.

Research has stated that only about one in ten businesses will survive three years. So what can help you ensure you are one of the 10% who survives?

Here are some of the reasons why your startup could fail and what you can do to prevent it.

1. Over Reliance On One Customer

A substantial deal is great for the books. One customer can literally make management of projects easier and offer you a chance to concentrate on product delivery. But what would happen if that one customer suddenly fell through?

The majority of your company’s financial backing is gone in an instant.

Instead of having just one customer. It is always best to have lots of smaller value clients. That way, if one does disappear, then you can recover more quickly.

2. Bad Payment System

Debt is one of the biggest challenges for small businesses. Non-payment of invoices is not always the fault of the customer, for example errors in billing, bills not sent etc.

If your invoicing and credit control matters are not perfect – customers can find ways to avoid payment.

Therefore, consider having a set policy for collecting invoices and bad debts. The less that is owed to your business, the better your cash flow will be.

3. Bad Product Design

The quality of your product will determine your long-term success. While you might be an ace at sales, if your product doesn’t live up to customer expectations then you will have a lot of abandonment.

This will relate to poor revenue and more time being spent on sales and prospecting. It might also lead to a poor reputation in the marketplace that can be detrimental to sales.

Make sure your product is ‘fit-for-purpose’ and that you are marketing to the right people. If you notice a certain segment isn’t enjoying your products – stop marketing to them and find a demographic that are interested.

4. Too Many Costs

You have to have an analytical mind when it comes to purchasing within your business. Too many businesses don’t succeed because they don’t have the funds to meet supplier costs – yet some of these costs could have been reduced.

For instance, website hosting can cost anywhere from $15 to $100 per month depending on the package and host provider. Shop around when you are looking for a quality service and don’t assume they are good quality just because they are expensive.

5. Not Spending Enough

Sometimes investment is necessary to offset skill shortages you have, or to improve your business’ efficiency.

For example, a good CRM system can reduce the time it takes to prospect and allows you to see opportunities that aren’t obvious. Therefore, always look at what you are buying and how it can benefit your business.

6. Not Enough Sales

This is a killer for startups. Without sales, you can’t generate revenue, and your business will fail. You might have a great product, quality marketing materials and a good sales team – but if you don’t generate sales, it’s worth nothing.

There are tools available to help you sell more, and CRM is one. By monitoring contacts for purchasing behaviour and interactions with your brand, you can choose the perfect time to sell to them.

It also discourages your sales team from abandoning contacts too soon. Most sales people will abandon a prospect before the 5th interaction – but 80% of sales can take between 5 and 12 interactions.


Your startup is important but it also has the odds stacked against it succeeding. Beat those odds by ensuring you have a good cash flow. Use the tips above to help.

What challenges does your startup face? Are you in a crowded market?

Let us know in the comments.

Posted on October 27, 2021 by Sean Miller