How lack of planning contributes to small business failure

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Small business failure can be attributed to many causes and it is difficult to narrow it down to just one reason why a company would fail. However, if the reason had to be narrowed down to just one, it would probably be due to a lack of planning.


When starting a small business, proper planning is an essential part of the ability to succeed. While the idea of owning one's business is nice and provides hope for a secure financial future, it cannot come to fruition unless good planning is involved. And planning requires both focus and vision to contribute to building an entrepreneurial dream.

There are many areas of small business that require planning. To start, that entails taking that dream and begin to put the proverbial wheels in motion to bring it to a realistic possibility.

Once this happens, it is essential to follow through on all the necessary components that make a small business a success. If these planning areas are not well attended to, this is ultimately going to lead to small business failure.

Lack of vision planning

First there is the vision planning. This aspect of planning requires a clear focus on the kind of business to start. While it's fun to come up with a great selling idea and the first instinct may be to run with that thought, it is vital for the hopeful small business owner to stop and give the notion some serious thought and ask his or herself a few questions. Questions, such as:

• Is there a current market demand for this niche?
• Will the business be a valid opportunity in the long-term?
• Is the type of business something envisioned still doing in a few years?

While an idea may sound lucrative in the beginning, it is important to consider if the investment will be able to yield long-term results or even still be interesting after the initial stages.

Without choosing a firm direction and being able to estimate if the type of business holds any validity in current or future markets, this is going to nosedive into business failure. Small business owners who aren't willing or able to develop a solid strategic plan are going to increase their odds of failure.

Planning with a future vision in mind is essential.

No financial planning

Plans on how to finance the business is essential. Starting up a small business requires money and, if owners do not already have the initial capital needed to invest and get the business running, then loans may be required. It is rarely a smart idea to deplete one's individual financial resources from the beginning, because it typically takes any business at least a good one to two years to begin to turn a profit.

Additionally, while small business loans are of great assistance, it is important to keep in mind these must be paid back at some point. Unfortunately, sometimes small business owners get so wrapped up in the details of getting the venture up and running, they fail to account for the fact profits may not come initially. Realistically, the company could operate in the red for a long period of time before the business begins to flourish. In a scenario like this, the banks will eventually begin to call in their payments and, if preparations have not been made for the time frame where revenue is still not coming in, it will be difficult to make that repayment.

Without proper financial planning the opportunity to prosper may not come because the small business owner failed to account for the time period when there is no in-flow of cash. A sound and secure financial plan is critical before attempting to open a small business.

Poor marketing plan

Marketing is another important facet of the planning process for an upstart. There is a lot of competition, and unless a small business owner finds a unique niche that no one else has filled and naturally draws business, marketing is going to require substantial planning. Those who choose a market where competition is present, there is an important need to differentiate and convince consumers their small business can fulfill a need, and this is where significant marketing planning is required.
Even with a unique niche idea, there will be a need to plan for marketing, but the competition may not be as high. Regardless of the competition, if a small business cannot effectively market itself, consumers are not going to come because they'll be too busy scoping out the competition. It takes a lot of work to grow a new customer base, and new small business owners have to come up with a solid market plan.

A lack of planning in several key areas is the biggest reason for small business failure. To succeed, the small business owner must consider vision, financial and marketing planning when building their business. Without these components, the small business owner has a much higher probability of running into trouble with being able to turn a profit or even sustain.