Why Do Most Small Online Businesses Fail?

Unfortunately, studies have shown that 90% of online businesses fail within the first four months of operation. If you want your business to find long-term success in the e-commerce space, it’s important to learn from those failures and prevent them from happening.

So why do 9 out 10 small online businesses fail?

1) Not Doing Enough Research Beforehand

These days, it’s easy for anyone to start a small business online – either through a website or social media – so it’s taken a lot of thought out of the process that usually happens when starting a more costly brick and mortar business.

Diving right in without properly researching how to effectively run a business, what customers are actually looking for, or what the competition is doing, is a sure fire way to fail.

2) Not Effectively Managing Cash Flows

You don’t need an MBA to start a small online business, but you should do your research on how to effectively manage your revenues and expenses.

29% of startups struggle with managing their finances. In order to succeed, you need to ensure you have a proper plan to keep operating costs low and revenues flowing. If you have a successful ecommerce store that is making a few thousand dollars a week, but you don’t know what your operating costs are, you may run out of money very quickly.

Additionally, if you’re not keeping track of the profit margin on the products you are selling, or tracking the costs of the sales you are running, you may be at risk of under-pricing your products so that your business isn’t sustainable in the long term.

3) Not Being Competitive Enough

Most startups fail when they’re not prepared to handle the competition. If you’re not beating them, you should at least be able to compete with them.

Do a thorough competitor analysis to understand what your competitors are doing and why. You need to be aware of the strengths and weaknesses of your competition in order to make well-informed and strategic decisions in how you run your business in the market.

4) Not Having a Marketing Strategy

People aren’t going to flock to your business in droves simply because you have one. Online businesses need specific types of marketing like website SEO strategies and strong social media presence. Without them, you may as well accept defeat.

5) Lack of Real Commitment

When you’re first starting your online business venture, it can seem like the most important and exciting thing in your life, but unfortunately, many entrepreneurs don’t maintain the initial level of high commitment. They start losing focus and their drive to succeed as time goes by and they encounter different challenges.

Don’t get dejected or lose patience with your online business. Everything is hard at first, but with real commitment, it will be worth it.