Why Small Businesses Fail: The Myth of “Great” Service

Here's why customers don't care about great service or expertise and what to focus on instead.

Why Small Businesses Fail Blog Post Nov21

I guess having my own business is better than working for someone else. At least I get some perks for being the boss.

That is what I used to tell myself years ago when I owned a business in another industry. Like everyone else, I had good days and bad but didn’t think much about the future. Besides, I figured that if I didn’t focus on today, there would be no tomorrow to worry about.

Unfortunately, what I didn’t know caught up to me. After eight long, exhausting years, I gave up the fight and closed the doors.

As I look back now, I see what went wrong. My business plan boiled down to one word: hope.

And that isn’t much of a plan.

But I see it all the time—business owners who think if they can keep the doors open long enough, everything will be okay. They believe business success comes down to doing good work and taking care of customers.

But it doesn’t. Most people couldn’t care less about your promises to do good work or the great service you provide.

Think about it: all your competitors are making those same claims. So, if you believe these promises set you apart, you are missing a lot of opportunities.

Yes, service and expertise are important. But customers expect great service and expertise when they pay for something.

So, what do people care about? What can you do to make your business unique and reduce your chances of small business failure?

Read on to find out.

The Real Reason Small Businesses Fail

Most of us have heard that if we can survive the first few years in business, our chances for success increase. In today’s society, startups are risky ventures that come and go like Top-40 hits.

But a little research reveals that staying in business for a year, or even a few years, isn’t that difficult.

Want proof?

According to the U.S. Bureau of Labor Statistics, only 20% of businesses close down after one year. A whopping 70% survive through year two.

This is in stark contrast to what we’ve heard about small business failure.

This chart shows that the longer you are in business, the more likely you are to fail.
The longer you are in business, the more likely you are to fail.

Now, for the truth:

The longer you’re in business, the more likely you are to fail.

In reality, 7 in 10 businesses fail within ten years. You would think these grizzled veterans of commerce would know how to survive in the marketplace by then.

Yet 70% of them end up pinned to the mat crying “Uncle!” after a decade of shedding blood, sweat, and tears to make their dream a reality.

But the reason they are forced to quit isn’t always obvious.

They worked hard. Most of them took great care of their customers and did fantastic work. Yet they continued to struggle. Why wasn’t great service and hard work enough?

What made these wily business owners finally decide to throw in the towel?

Because they realized their businesses weren’t giving them the joy and freedom they envisioned having when they started.

Most small business owners work hard, run ragged, and make sacrifices to keep the dream alive. And things go well for a while—until they realize they rarely ever get to live the dream they have been chasing.

Most think if they can keep going long enough, they will be able to hire more help, raise prices, or take a little time off.

But that day never comes. Instead, many of them end up looking back, as I did, wondering what went wrong.

How can you avoid being one of them?

Let’s find out.

Business Failure Isn’t Complicated

In a survey of 101 small businesses, the owners were asked why their business failed. Here is a summary of what they said:

  • No market need for their products or services (42%)
  • Ran out of cash (29%)
  • Didn’t have the right team running the business (23%)
  • Were outcompeted (19%)
  • Pricing and cost issues (18%)
  • Poor product offering (17%)
  • Lacked a business model (17%)
  • Poor marketing (14%)
  • Ignored their customers (14%)

At first glance, there appear to be many reasons businesses fold. But a further review of this list reveals a pattern. The common denominator lies in the number of customers acquired and the profit made on each.

I will explore this theory in more detail. But first, there is an important business growth concept you should understand.

This ONE THING Can Help You Avoid Business Failure

Have you ever wondered why some companies thrive while others fight for every sale?

Many people think these elite companies got lucky or had good timing. Others think it is because they had more money and resources.

Of course, the business with more resources always has an advantage. But it doesn’t guarantee success. Businesses with lots of resources fail just as often as those with less.

The thriving businesses are successful because they are willing to do things competitors aren’t. They have remained consistent while following an intentional, results-driven process.

That process is known as a brand strategy.

A brand strategy is an organized plan with short- and long-term growth goals. This process differentiates the business by leveraging strengths to build more perceived value. The more value people think you offer, the more they are willing to pay for it.

This strategy helps a business create and build a unique brand identity. This identity influences how people see your business. If they believe your brand offers more value and quality, they are more likely to buy.

But how do you build a brand identity that will attract more customers and for higher profit?

Stay Away from Marketing Hacks

Business owners often become distracted by the latest marketing “hacks” to get sales. These are tactics like social media ads, guru marketing systems, and SEO tricks. Another popular way to get sales is to offer a deep discount on prices.

These may work for a few weeks or even a few months. But eventually, these marketing tactics quit working because a competitor undercuts your price or a search engine algorithm shuts you down.

Shortcuts only work until everyone else finds out about them and starts using them too. And most guru marketing systems aren’t new. They have been around for years and you can learn them for free by doing a little research on Google.

Read this to get help with in-house marketing.

Premium brands use time-tested strategies that have helped successful companies grow for decades. These work as well today as they ever have.

To build a successful brand, you must find what works for you and leverage it to grow your business.

Many business owners jump straight into marketing, trying to make as many sales as they can. Unfortunately, they have missed an important step. As a result, most of their marketing falls flat.

The image below illustrates the approach most businesses take with marketing:

The typical approach to marketing a small business does not work.
The typical approach to marketing a business.

But there are several flaws with this approach.

First, there is no consistency in messaging, which confuses the audience. And a confused mind says “no”.

Second, you aren’t doing anything to create a real competitive advantage. In fact, when you make the same promises as your competitors, you lump your business in with theirs.

Finally, there is no focus on building unique perceived value. That means most people will see your product or service as just another option for them to choose from.

Build a Brand to Build Your Business

Let’s take another look at why small businesses fail listed in the previous section. Two out of three could have been avoided with a brand strategy. They are:

1. No market need for services or products. Branding builds more value around your product or service. The more value people think you offer, the more likely they are to buy it.

2. Were outcompeted. Branding leverages your strengths to set you apart from competitors. Most businesses underestimate the value and power of their brand identity.

3. Pricing and cost issues. Again, branding helps you build more perceived value for your offer. (see #1)

4. Poor product offering. A brand strategy helps you identify an ideal target market and the product qualities that matter to them most. This process strengthens your offer.

5. Poor marketing. It’s easier to promote a strong brand than a weak one. Consistent branding has a major impact. Did you know consistent branding can increase revenue by as much as 33%?

6. Ignored their customers. A brand strategy focuses on building the customer journey. This makes your business customer-centric on all levels, not just the service department.


The longer you are in business, the more likely you are to fail. To succeed, you must leverage what you do well and build on it. A brand strategy can help you do that.

Are you ready to stop wasting time and money on marketing hacks that don’t work?

Would like to have the kind of business you envisioned building when you started?

If you said yes, click here to get started. Or email me personally at chris@goldenvineyardbranding.com with any questions you have.

Until next time,



Chris Fulmer

Chris Fulmer

Director, The Golden Vineyard Branding Company

Free Resource

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