Common SME issues that lead to business failure

In today's market place led by multinationals and global brands, small business often struggle to assert themselves. The Australian Bureau of Statistics found that in the last five years more than 30 per cent of SMEs have failed in their start up and each year more succumb to administration and insolvency.

In order to avoid business failure it's a good idea to become familiar with the conditions that contribute to small business failure. Saturated markets and the dominance of global brands can have an effect on your business growth but majority of the time there are underlying factors that cause SMEs to fall short.

Here are five common issues that cause small businesses in Australia to fail:


Businesses are built on more than ideas and business success is rarely determined by a product or service alone. In order to succeed it's vital you conduct the research and planning necessary to strongly position your business. New business owners often fail because they have the long term vision without considering the processes necessary to keep the business viable in its immediate future.

Lack of market knowledge

In order to win customers and new business you need to understand your market. Before opening your doors for business you should be able to answer who your customers are, what are their buying habits and which competitors they are currently buying from. It's also equally important to know what makes your product different and understand where your competitive advantage lies.

Poorly placed

A lot of SMEs don't have the same marketing budgets when compared to their larger competitors so location can be imperative when trying to build a customer base. Making your business visible will improve your chance of winning new customers from walk in traffic.

However, if you can't afford that ideal location, there are ways to market your business on the cheap.

Inadequate financing

As we've mentioned numerous times in our cashflow articles, cash is king and essential for SME success.Your business will always experience downward trends and in order to survive early on you need a strong financial backing to cover for slow periods. Therefore, when starting up it's a good practice to develop a cash cushion to ensure your financial safety.

Lack of management

This failure ties in with inexperience as in most cases SME owners will have an idea about how a business is run but not a complete understanding about what is necessary to run the business. Management considers the broader scheme of keeping your business afloat and involves all activities from planning to communicating and coordinating.

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