Here are the top 10 reasons why your SME could fail this year

Small and Medium Enterprises

Small and Medium Enterprises (SMEs) make up the vast majority of businesses in operation. But just because they’re the most commonly run type of business in the UK, doesn’t mean success comes automatically.

Keeping your SME in a good place is tough and every year plenty of SMEs shut up shop. Make sure yours isn’t one of them this year by learning where the pitfalls are, and how to avoid them.

  1. Improper planning

Most businesses start from ideas that are later transformed to products. These ideas are often viewed through rose tinted glasses. Ideas are just ideas if a proper plan is not built for them. Every small business must have adequate planning for their concepts to translate into commercial success. Unrealistic plans have seen even big companies fall.

  1. Capital deficiency

Far too often it’s improper financial planning that has led to the failure of small businesses. Cash failures and crunches are all about overestimations of profits while still in the investment stage. It can take a year or two for a business to really establish itself. In the meantime, costs must still be paid out. This must be factored in when planning financing and your business cash advance.

  1. Selling on credit

Providing credit can help your clients do business with you but it can also prove to be a bad choice if not done correctly, with a guarantee of the client paying.  The desire to secure new clients can prompt new business owners to give goods on credit, even when this puts them at risk of not being paid. It is essential to do a cash flow review before committing to any new credit agreements with clients.

  1. Outsourcing failure

Professionals know the benefits of outsourcing, particularly when overwhelmed with orders. However, this can also lead to failure for some SMEs if the right channels are not passed. Follow these guidelines to help you outsource wisely as an SME:

  • identify where your weakness are and where you could most gain from someone else’s expertise
  • avoid outsourcing to someone simply because they are cheap. It could turn out to be a false economy.
  • Have a close relationship with the person you are outsourcing to
  1. Competition

In any sector you go into, it is a fact that you will face competition. Competition is healthy, but you need the right tools to seriously compete. If you fail to study your competition, then you are most likely setting yourself up for failure. Study their strengths and weaknesses. Analyse their pricing, product quality and approach to customer service to keep yourself from falling behind.

  1. Finance tracking failure

Most small businesses put a lot of emphasis on selling or developing products but forget to have a finance tracking mechanism. This will send you on a path to losses without knowing where they are coming from.  Accountability is critical in any business. You can use technology to help keep track of your finances. Modern business accounting software like QuickBooks and Xero can help you manage your finances effectively.

  1. Ineffective marketing

Every type of business, small or large, requires effective marketing. People must know about you before they can think about buying from you. Advertising can seem like an expense you just can’t afford as an SME, but it’s the expense you can’t afford to do without. Make use of social media and utilise its free exposure opportunities.

  1. Overwhelming growth

One significant aspect that has lead to the downfall of many SMEs is growth. Sounds paradoxical, doesn’t it? But many SMEs are simply not prepared for the growth their company needs to go through in order to keep up with demand. If you do as well or better than you expected to, you will need extra space, extra staff, more investment and more expertise. So don’t get left behind when your business takes off.

  1. Poor leadership

Leadership and management skills are essential  for every business leader. Lack of either of these two means the business is more likely to fail. When you are in business, you can be everything from the workforce to accounting. This has been the downfall of many an SME. Your business will thrive if you can bring in expertise and outsource areas that you know are your weaknesses. This demonstrates good leadership skills just as much as managing everything yourself.

  1. Lack of uniqueness in the products

Every product must have a unique selling point. Think of something that sets you apart from the others in your field, or you risk becoming something people can easily do without.


SMEs are the backbone to most countries’ economies. And yet all too often, their success is treated as something of a lottery. However, there are plenty of things you can do to ensure you become one of the success figures, and not one of the failures. Don’t leave it to chance. Understand what leads to success and make sure you’re on the right track.