The common reasons start-ups fail and how to avoid them

7 Minutes

It is a widely adopted statistic that 90% of start-ups fail, around 20% in their first year. As an accountancy practice who is passionate about supporting ambitious, forward-thinking business owners and entrepreneurs, we understand the common reasons why start-ups fail. We also know how these problems can be avoided.

We’ve summarised the most common reasons for start-ups failing in this blog.

Flawed business plan

Every business, no matter what size, needs to have a business plan. It is a document which sets out your business strategy, your key goals and ultimately how you are going to get from where you are to where you want to be.

Even as a start-up, you should have a business plan. However, what is more important than having a business plan, is having a good one in place.

Typical flawed business plans are poorly researched, have little financial forecasting (or miscalculated financials) and are generally quite vague in the specifics of what will be done to achieve the goals of the business. It is great to have ambition and to ‘dream big’ but it needs to be backed up with a solid plan of action to make it a reality.

Often the business plan will be written and then left to gather dust somewhere. It needs to be a living, breathing document which is why it is so important to get it right.

Poor cash flow planning

Getting a successful business up and off the ground does require investment of time and money at the start, and from our experience it will cost more than you realise.

It is difficult to forecast when you have little data to base this on but that shouldn’t prevent you from pulling one together. You can forecast for different outcomes so that you can be prepared for the worst case and best case scenario. Then as you begin trading and have actual data to feed into your forecasts, you can revise your predictions and work from new and updated documents.

Cash flow problems will hit every start-up at some point, it is a common part of the entrepreneurial journey! By creating a cash flow forecast you should be able to spot when cash is going to be tight and be in a better position to manage your way through it.

If you are planning to invite investors to look at your business, you will definitely need a sound cash flow forecast.

The wrong people

Having the right people and skills in your business is most definitely part of the recipe of success. The skills needed will change and adapt as you grow. You won’t need them all right at the beginning, but you’ll spot the gaps as you come across the challenges of growth.

A strong business needs a good mix of skills. It can be difficult to find and recruit the right people in the early stages. You might be tempted to work with enthusiastic friends or acquaintances. They will probably be great fun to work with (especially in the beginning) but if they aren’t delivering on their responsibilities and bridging the skills gap, it’ll soon turn to friction. Think carefully about who you bring into your business and don’t rush it.

Changing market conditions

Growing a successful business would be a doddle if we had a crystal ball to predict the ups and downs of the market. Sadly, there are no guarantees and we’ve learnt some valuable lessons since 2020 and the Covid pandemic that brought the world to a standstill.

This links back to the business plan. A successful start-up business has real in-depth knowledge and insight into the market, knows everything they can, and does not base their actions solely on their own previous experience and assumptions. They have tested and dug deep to really know what makes their target customer tick and what could impact the market over time.

Some changes in the market will bring new opportunities but if your business is not set up to adapt and react to the changes, you could lose out.

How to know when you need advice

Having sound business advice from the beginning should help you to navigate the challenges as you grow, and avoid failing in those first few years. If you have a good accountant working with you from the outset, you should have the guidance from a financial perspective. Working with professional firms in other areas where you don’t have the skills inhouse (marketing, operations, HR for example) can also help you to avoid some of the common pitfalls.

We offer a free initial consultation if you would like to discuss your business and find out how we could help you. Call 0118 9977100 or email

NextGen 2023 - The competition for entrepreneurs in Berkshire

At WoodWhite Accountants we have been supporting start-ups with the solid business advice they need to get them off the ground in the early stages. It is a real passion of the team to support local entrepreneurs so much so we introduced a competition specifically for start-up businesses in Berkshire and the surrounding area.

The NextGen competition gives these local entrepreneurs the chance to WIN a years’ worth of valuable financial, business and marketing support from WoodWhite Accountants and a number of specialist partner companies.

NextGen 2023 is open to applications until 31st January 2023. To find out more and apply click here.

Related Articles
Submit an article

Submit an article.
Share your experience.

Are you already Signed in? Share your article below.
Are you new here? Sign up free below and start sharing.

Submit an ArticleSign up free

Privacy Preference Center