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Reasons Why Disadvantaged Businesses Fail

Many contributing factors play a part in why many businesses fail during the first trial run. When developing a business plan, many new entrepreneurs tend to forget certain logistics that are essential for not only starting the business but for the evolution and expansion of the business. Aspiring entrepreneurs want to know why disadvantaged businesses fail. Well, let's take a look at some of the reasons why this unfortunate event happens. It could maybe save your business before you even begin.

  1. Poor Financial Planning

Before starting any business, it is vital to have a good financial plan as a part of your blueprint. When finances are in order, all of the other major things will fall in line. However, one mistake some business owners make is not planning financially accordingly. The keyword to keep in mind is an investment. When you hear the word invest, it doesn't only mean to go to a banker or someone you know and get a bunch of money. Initially, that may seem like a critical move. More importantly, it's about what you plan to do WITH that money.

Any individual can say they want to start a business. And let's say to start that business they would want to borrow fifty thousand dollars to start it. The question you should ask yourself is "how are the fifty-thousand dollars going to be utilized to help with creating the foundation of this company? What percent of the money I wish to invest is going toward certain expenses to get the business jump-started?" Before even considering any of those questions, the initial question to ask yourself is "what is my budget? How much is it going to cost me to jumpstart my blueprint?" This is where your research has to come into consideration.

A part of poor financial planning coincides with one downfall. And that downfall is not asking for help when it is needed. For example, there are many financial planners and advisors that are available to assist potential business owners and CEOs. Some disadvantaged businesses fail due to not reaching out to these resources if they know something is missing from their financial plan, or, on another note, if there is no financial plan to begin with. With the assistance of an advisor, these financially skilled individuals will partner with the owners to keep the company's money guidelines in order. A financial planner/advisor will give you a front-row seat allowing you to witness how much money you are working with as well as the possible outcomes from your investment.

To speak more about the term "investment", the purpose of investing is to make back the money that has contributed to the start of the business if not more. Some individuals who have a blueprint for investing in starting a business tend to forget about financial longevity, which is crucial with any financial blueprint for a business.

2. No Control of Financial Management

To have the finances to start a business is one thing. However, how the company's money is maintained is another consideration. A second reason why most disadvantaged businesses fail is because of a lack of in-house control of finances.

The information that will be mentioned in this part of the discussion will reflect some of the information that was mentioned in the first reason. When it comes to financial control, it's more so about managing the money rather than just making the money. Based on an excerpt from Preferred CFO, According to research done by U.S. Bank and cited on the SCORE/Counselors to America's Small Business, the reason small businesses fail overwhelmingly includes cash flow issues. This includes poor cash flow management and poor understanding of cash flow, starting out with too little money, and a lack of a developed business plan. - (Preferred CFO, Michael Flint, 2022). And according to this source, 82 percent of businesses fail because of this.

Financial management is something that involves how the money is being utilized and how the money for the company is being spent based on in-house obligations. One way to keep better track of business expenses is to become familiarized with applications and tools that will keep tally marks based on how much is used for the company's growth. There are many tools available to assist with such tasks. For starters, a couple of those tools include Quicken and Goodbudget. According to a post from, some apps that can be used are Google Sheets, Intuit Mint, Personal Capital, and GNU Cash. Having these types of tools handy will assist with the budget that is planned for the company. With the usage of these tools, not only does creating a budget give you a greater sense of control and awareness of your money, but it can also help you reach certain financial milestones, - (, 2022).

Having financial control allows the owner to stay in the loop of how the money in the company's bank account is being dispensed accordingly. Moreover, since there are disadvantaged businesses that don't take heed to use similar resources, those businesses tend to flop immediately.

3. Lack of Workplace Strategy

Workplace strategy is the meat and potatoes of what allows a business to rise and maintain momentum. The team behind the scenes is the primary force that pushes the business to its zenith and aims for success. And with a great team comes great strategizing. If there is a minimum standard of what you expect from your team, this can contribute to the business failing.

Strategic planning for a team is like prepping propellers for a boat. If there are proper guidelines, goals, and an understanding of mistakes that may be lurking, then the propellers (the strategy and team) will push the boat (the business) gradually in the right direction if not faster. On the other hand, if components are missing from the strategy, such as an understanding of the company goals, time management, and even keeping up with simple in-house obligations, you can't expect the ship to sail if there is a mechanism missing. Meaning, if there are essential aspects of how you want the business to be run that are not incorporated, you may dread those weekly, monthly, and quarterly meetings.

4. Impractical Workplace Goals

Setting goals is not as simple as it sounds. With setting goals for a business blueprint, there is work that has to follow. However, some businesses that are considered to be disadvantaged tend to create goals that are unrealistic and impossible to reach.

For disadvantaged businesses, many internal disadvantages follow when the goals to reach are impractical. The first disadvantage is the company suffers from burnout. If there is an unreachable accomplishment that is set for a company, this causes the CEO as well as the team to work twice as hard. And while working twice as hard, no one is cognizant of where the hard work will take them. In other words, everyone is just shooting in the dark. What makes matters worse, is that the owner of the company is just as oblivious to what is happening. So, this is a classic case of the blind leading the blind. For a business of any size and capacity, this is destruction in the making.

When you think about a business suffering from burnout, think of it like this; Imagine that you are creating a workout plan. When you set this plan, you have documented the times you plan to go to the gym, how many hours you have to go, how much weight you want to lose or gain, and even your diet is planned to perfection. However, shortly after starting your regiment, you begin to notice that you are getting more exhausted than you had expected. And as you are getting exhausted, you start to relapse on your diet. And after relapsing on the diet, you slack on the hours of your gym regimen. Eventually, you find yourself falling off of the workout plan completely. This then leads to another disadvantage which is quitting.

Once the company loses momentum with getting ahead, this will have a major effect on the employed workers. When major exhaustion has plagued the workplace, the employees will lose motivation to continue to work for a company that is going under. So, aside from getting fired, the employees would rather leave voluntarily. And with a lack of employment due to this in-house issue, could result in bad reviews based on the previous employees that were recently working for the company, which will prevent potential new hires from coming on board.

In the same way you suffer from burnout and quitting when setting an unrealistic workout regimen, the same instances apply to most businesses with impractical goals. Most of the time when something like this happens, the owner of the business may be intimidated by the competition and focus solely on getting ahead of the game. Sometimes, it's not all about getting ahead. It's about how you plan accordingly to get there with goals that are reachable and logically possible to meet. Biting off more than you can chew can come back to bite you in the end.

5. Lack of Networking

Everyone hears the word "network" a lot when starting a business. To be honest, networking is a key component to help maintain business relationships. And when you build and maintain business relationships, this can help excel the company as well. Many disadvantaged businesses fail because of this missing necessity.

Most disadvantaged businesses may lack networking due to not performing enough outreach, meaning the company isn't sharing its contact and social information as much as it should. Some of these disadvantaged businesses feel they have to reach out to as many people as possible, even if those people or companies don't coincide with the interest of the business. However, that theory is wrong. Performing outreach can be as simple as connecting with businesses that have a similar platform or foundation although the brands may differ. Or, simply connect with individuals that may need the services the company offers. For example, if you have a printing company, you may want to connect with independently owned companies that may need printing services. When you reach out to these individuals, you express what your company is about, what services you offer based on what they are looking for, and exchange contact information. And just like that, you not only have a client, but someone that is also a part of your networking roster.

The good thing that comes from networking is after company services are performed for that individual, the word will travel about the company and others will be interested which will then transcend to potential clientele inquiring with that company in hopes to do business.

Although this process sounds simple, businesses that are considered to be disadvantaged may see this differently. In other words, there might be something that isn't working in favor of the business for them to perform proper outreach. To accomplish this, the business must have a source for outreach before doing so. Some of these sources can be as simple as a social media platform, a website, and business cards. Even having a direct and steady contact number is a great source. From a social media point of view, when a business has a social media platform or website, it is like having a resume for the company. The information that is displayed on the website or social media gives the clientele a bird’s eye view of what the company is about, which makes the process of explaining the mission of the company rather less complex. And after taking a glance at the media platforms for the business, contact information can be exchanged. This is where business cards (either printed or electronic) come into place.

Most businesses that are disadvantaged may not have these resources on hand. Without any resources to network, either within or outside of the vicinity of the company, the flow of business will not only be slow but this type of productivity will result in no business flow at all.

6. Underestimating Competition

Another mistake that results in disadvantaged businesses failing is underestimating the competition. Have you ever heard of the phrase "don't count your chickens before they hatch"? Well, three words should come to mind when starting a business venture. And those three words are DO YOUR HOMEWORK.

Let’s say that you have your blueprint planned properly, you have your finances in order, your team is held to an exceptional standard, and your networking plans are well thought out. All of this seems well and swell. However, you start to notice that you are getting phone calls and emails from your customers and clients questioning your services and asking for better deals even though you are providing the best deals you have to offer. You soon discover that they are asking questions because it's then brought to your attention that they have been observing another company that provides the same services as you do. And not only that, but the company offers better prices plus more. So, not only have your clientele been inquiring about another company, but the clientele then "cheats" on you with the other company, leaving your services to do business with the counterpart.

One instance that contributes to disadvantaged businesses not "doing their homework", is because they don't want to see who they are battling due to a fear of failing. When you take a look at the competition out there, this allows the business to view the competitor's process to see what can be done to maintain strength and momentum in the chosen industry. Another instance can simply be bad planning when it comes to the location.

7. No Accommodations with Geographical or Virtual Location

Just like researching the competition is crucial, researching the location where the business is started is just as significant. One of the main aspects that would classify a business as being disadvantaged is the location in which the company is stationed for ground zero.

What has to be understood is that for businesses that have tangible products and services, the location of the business has to be in a vicinity where those products and services can be disbursed to the according audience. For example, if there is a company that is involved in the tech industry that promotes and sells the hottest technology products in the market, ground zero for that business would be within proximity of an urban area that is in close range of the hustle and bustle. On a larger scale, you would never find a Wal-Mart or Target in an area where there is mostly farmland, would you?

Even if the business isn't involved in anything universally evolutionary such as the tech industry, regardless of what the niche is, if ground zero is not in an area where there is constant motion, this can lead to extremely low sales and little exposure. These events will eventually cause the business to fail.

From a non-geographical perspective, if services or products are offered virtually, location is also essential. When it comes to virtual businesses, location is based on the virtual platforms that are utilized to push the agenda of the business. Social media is a prime example. According to a source from Investopedia, “These days, your location on the internet and your social media strength can be just as important as your company's physical location in a shopping district. An online presence will let people know that they can give you their business, so if the need is already there, the availability and visibility of your business is the next important step.” - (Investopedia, Michael T. Dean, 2022)

For a virtual business to thrive, it has to be involved and active on popular social platforms where there is the most traffic. Whether the company has plans to thrive in a physical or virtual location, the main prerogative is to be in the heat of the action. When a business is developed in a busy location, this allows the company to market its products and services more effectively. For businesses that inadvertently stray away from the hotspots, there would be more cold shoulder action rather than warm handshakes.


Starting a business can be complex in more ways than one. There are a lot of logistics that follow for the foundation to be laid and prosper. Moreover, circumstances can happen where some, if not all, of the logistics are not in place. When this happens, unfortunate events occur that lead the business into a downward spiral.

To be at a disadvantage can be troubling and overwhelming. What's more essential is to apply a beneficial plan of action that allows your blueprint to play out accordingly, even if that means you have to start over from the ground up with rebuilding a better team, rearranging your finances, or even changing locations.

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