Sep 12, 2023 in Business Coaching

6 Things That Businesses Fail At Constantly

For better or worse, small business owners don't know what they don't know about operational failures.

Small businesses are the backbone of many economies worldwide. They bring innovation, jobs, and local character to communities, but they also face significant challenges, some of which can lead to business failure. This article delves into six recurrent issues that small business owners struggle with, particularly focusing on tax blunders, time management, and misplaced business priorities.

1. Overpaying Taxes Due to Poor Financial Management

   Small businesses often pay more in taxes than they should, largely because of inadequate financial management. In a report from SCORE, it was noted that 40% of small business owners say bookkeeping and taxes are the worst part of owning a business¹. Overpayments can stem from:

   • Not leveraging available tax deductions.
   • Not classifying business expenses correctly.
   • Inadequate record-keeping.

2. Not Seeking Expert Tax Advice

   While entrepreneurs excel in their fields of expertise, tax codes can be a quagmire. According to a survey by Clutch, 30% of small businesses don't use accounting software², meaning they might be unaware of potential tax breaks or stipulations. Failure to consult with a tax professional can result in missing out on valuable deductions and credits.

3. Not Planning for Quarterly Taxes

   Unlike salaried employees, entrepreneurs are responsible for paying taxes on a quarterly basis. A CBIZ report found that failing to properly plan for and pay quarterly taxes is a major pitfall for many small businesses³.

4. Over-involvement in Day-to-Day Operations at the Expense of Strategic Planning

   Entrepreneurs are typically passionate about their businesses, which can lead them to be deeply involved in daily operations. While this commitment is commendable, it can impede their ability to focus on long-term strategy. Michael E. Gerber's The E-Myth Revisited notes that many entrepreneurs work "in" the business rather than "on" the business⁴. As a result, they often neglect to implement systems and processes that can allow the business to operate efficiently without their constant intervention.

5. Failure to Implement Scalable Systems

   As a business grows, it needs scalable processes to sustain that growth. Without these, inefficiencies can arise, leading to wasted time, resources, and opportunities. According to Bain & Company, companies that scale properly grow 20% faster and are more profitable than their competitors⁵.

6. Having the Wrong Focus

   In the rush to generate revenue, some entrepreneurs lose sight of their original vision and the needs of their customers. Rather than delivering quality or focusing on a niche, they scatter their efforts. Harvard Business Review emphasizes that understanding and focusing on core competencies can make or break a business⁶.

Conclusion

While running a small business comes with myriad challenges, being aware of common pitfalls can help entrepreneurs navigate the complexities of entrepreneurship. By addressing tax issues head-on, prioritizing strategic planning, implementing scalable systems, and maintaining a clear business focus, small business owners can enhance their chances of long-term success.

Citations:

Footnotes

1. SCORE. (2019). Infographic: The Importance of Bookkeeping for Small Businesses. 

2. Clutch. (2019). How Businesses Use Accounting Software. 

3. CBIZ. (2020). Small Business Tax Mistakes to Avoid. 

4. Gerber, M. E. (1995). The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It. 

5. Bain & Company. (2017). Founder's Mentality: How to Overcome the Predictable Crises of Growth. 

6. Teece, D. J. (2007). Explicating Dynamic Capabilities: the Nature and Microfoundations of (sustainable) Enterprise Performance. Harvard Business Review. 

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