Business Failure: Why Stores Fail & How to Avoid that Deathblow


Business failure happens. According to Forbes, 80% of new businesses fail in the first 18 months. Moreover, reports that only 4% of all businesses remain in business more than 10 years.  Clearly, business failure concerns all business owners.

What signs do you look for to avoid becoming one of those business failure statistics? In over thirty years of working with retail stores, we have found some sure signs.

business failure




  1. Find a management method that works
  2. Customer service makes a difference
  3. Managing cash flow
  4. Business management
  5. The entire picture
  6. Related resources



Sign 1: “That’s the way we always did it” method of running the store.


business failure


If the method works for you, good. But is it really the best way of doing it? Maybe not.


One feed store in the midwest used this method.

Instead of allowing the computer to determine what they needed based on sales forecasting models the managers did all the ordering. They had items in stock when they needed them.  However, they also had items in stock when they didn’t need them. Additionally, they stocked items they would never need but were favorites of that manager.

That method cost them over $30k (of a $300k overall inventory) in overstocked inventory. Inventory taking up valuable space. Dead inventory costs money to purchase. It also takes up valuable shelf space that should have been filled with items that would sell.

Another store owner managed his store manually as they had always done.


When he opened a second store, and then a third, he continued with his manual system. He continued using his method as he always had until his seventh store. Suddenly, he realized he had no control on any of the stores. He scrambled to pull his stores together but was unable. Filing bankruptcy became his only choice.

Always consider new ideas and new approaches to tasks. Will the new method increase efficiency? Will it solve problems for you? Does it show you solutions to problems you didn’t realize you had? Obviously, not all will. Discard those. Seek those that help your business grow and prosper. Often, talking to others with successful business experience helps. A good business consultant might, as well.


business failure


Sign 2: “Can I help you?”


“Can I help you?”. Four words that might cause business failure. People love to say no. They want to shop and not be ‘bothered’ by that pesky salesperson. Asking a yes or no question like this will wind up as a no or “Just looking”.  Strike up a conversation instead with the person. Use sentence that are not yes or no. How about “What kind of dog do you have?”, “What’s its name?”. Turn the customer into a friend. People like to talk about those they love (and I mean their pets). Once you have that rapport, then show them new and unique items you sell for their pet. Keep going until they say ‘uncle’.

Instead, strike up a conversation. Ask questions that cannot be answered yes or no. Consider questions such as, “What kind of dog do you have?”, and  “What’s your cat’s name?”. Turn the customer into a friend. People like to talk about their pets. Once you have that rapport, show them new and unique items you sell for their pet. Keep going until they say ‘uncle’.


business failure


A bonus to this approach: Your salespeople and you will ENJOY your customers even more! Yes, most agree that a friendly approach benefits more than your profits. In fact, it offers incredible ongoing benefits to happiness of customers, employees, and management!





Sign 3: Managing cash flow


Cash Flow vs Profit explained


If you have a dollar left at the end of the day that does not mean things are great. Analyze your sales trends. Look at your ROI (return on investment) and ‘turn ratio’ (how often the inventory on an item sells each year). Optimally if you order weekly a 52 times turn is the goal with a 30 times turn being reasonable. Do you price shop between suppliers? A few cents here and a few dollars there add up fast. Remember the old saying “Watch the pennies and the dollars will take care of themselves”. Business success depends on watching the pennies.


Did you know? Few point-of-sale and management systems work on a true seasonal inventory system?


Sign 4: Using the right management tools to avoid business failure


Are you losing customers? Do you know why? Have you asked them? Maybe it was a bad experience in your store due to an untrained or worse yet, rude, salesperson. Losing customers means lost sales, too. In fact, this remains a major factor in business failure.

Perhaps you were out of stock on items they need Again, good management tools watch your inventory. Out-of-stock items don’t make money for you. 

With the right management tools in place, you should be able to tell who or what is costing you customers,  and who the rock stars are.



business failure

A Good Management System controls sales, inventory, and much more.

Bottom line, to avoid business failure, know what is going on in all aspects of your business.  



business failure


So, if you are missing the tools to do that, get them. The old expression “You do not know what you do not know” matters. However, what you don’t know can and will hurt you in many cases. Avoid business failure by using the right management tools.




Read More:


  • A successful business depends on having great staff. However, finding good employees often challenges the best of managers. We offer ideas and suggestions! Read: Hiring Right 
  • Small business often stresses the most organized owner/manager. In fact, one small business poll revealed that running a small business created twice the stress as maintaining a relationship with a spouse. However, we offer ideas on beating stress. Read: Stress Management
  • Retail stores must change and adapt to the current needs. Furthermore, brick and mortar stores face intense competition from online stores. However, you can win this battle! Read: Reinventing Retail




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