Top 10 Reasons for a Failed Online Business

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With the economy continuing to limp along after one of the biggest recessions in history,


individuals who have been forced to accept income reductions or been let go from their positions completely are looking for new ways to generate a stream of income. Going into business for oneself is a dream that many people pursue. Unfortunately, success in that dream is harder to achieve.

A huge percentage of startup online businesses fail in just a few years. Understanding the reasons why online businesses fail and avoiding these common mistakes may help your online business pursuit beat the statistics. The New York Times blog recently featured an article about the increasing prevalence of small business failure. Many of the reasons featured in this article are applicable to online business management, but there are a few key differences with an online business.

1. Not Enough Demand for Products and Services

The most significant factor that causes a small online business to fail in its first years of existence is simply a lack of demand for the product or service being offered. This often affects businesses that offer highly specific products or services that only appeal to a very minute niche of consumers. If there is not a widespread demand for your product, making a profit with your online business will be more difficult. You can avoid this pitfall by evaluating the current market and ensuring that your product or service is in high demand.

2. Inability to Compete

Online business owners often believe that they can provide a product or service at a reasonable cost to consumers. The problem, however, is that superstores offering the same types of products or services can often beat the prices of the small business owner. If you believe that consumers will benefit from what your online business offers, spend some time evaluating the costs and selling process of your competitors. If you can't beat their prices, your business may be doomed to fail.

3. Online Business Owners Who Fail to Learn

Another common pitfall that affects the new online business owner is a reluctance or flat-out refusal to learn. Many business owners believe that their methodology is superior to all of the advice, suggestions, and admonitions they receive from other working professionals. This type of attitude is hugely detrimental to the success of a small online business. As a new business owner, your goal should be to maintain an attitude of eager willingness to learn. Absorb every scrap of information and evaluate every suggestion that comes your way. The more you learn, the better your chances of succeeding.

4. Growing Too Quickly

This is one of the worst problems for an online business to encounter. Overgrowth may seem like a great problem to have in the beginning. Consumer orders and requests for your products and services start piling up in an online ecommerce forum. Your social media accounts are exploding. The reviews and recommendations for your business are glowing. Unless a business owner develops a plan to manage an increased workload, service a larger population of customers, and expand the business reasonably and methodically, growth can spell disaster.

5. Accounting Issues

This is one of the simplest online business problems to avoid, yet it's one that many online business owners overlook. Good accounting can determine the success or failure of a small business. Hiring an accounting firm to handle business taxes isn't enough. You need to hire a professional to evaluate overhead, expenses, marketing budgets, and sales figures to keep your business in the black.

6. Lack of Backup Funds

An online business is incredibly unpredictable. A change in search engine optimization tactics, the introduction of a new global business, changes to social media accounts, and a variety of other factors can cause dramatic changes in website traffic and customer interaction. Unless an online business owner prepares for these changes with backup cash, he or she will have nothing to fall back on during a dry spell.

7. Lack of Vision and Focus

For online business owners, an overall lack of vision and future focus can be a huge impediment to business success. It's easy to get bogged down by minute tasks when running an online business by yourself. That's why "big picture" mentality is so important.

8. Poor Targeting Strategies

The key to succeeding with an online business is developing a specific, intimate list of target audience members and using the right targeting strategies to reach that niche audience. If an online business focuses marketing efforts such as online advertising, social media interactions, and blogging on a target audience that is too wide and generic, the majority of those marketing efforts will fall on deaf ears. In the early stages of online business creation, most of the marketing budget should be spent on determining the right niche audience for your products and services.

9. No Plan for Evaluating Metrics

When your business is located within the World Wide Web, the opportunities for evaluating business success and marketing breakthroughs are virtually limitless. Even so, many online business owners spend virtually no time evaluating the metrics of their websites and social media accounts. The information about your website's success is there for the taking. Creating a plan for evaluating metrics and making changes is crucial; don't ignore this step.

10. Ignoring the Customer

The final thing that can derail the success of an online business is ignoring the customer. Because an online business has absolutely no face to face interactions with its customer population, it can be easy for owners to neglect customers and become too inwardly focused. Spend time listening to customer suggestions, thanking customers for their patronage, and using social media to get to know your niche audience on a personal level. Transforming your Internet business from impersonal and mechanical to personable and relate-able is a great way to stand out from the crowd of online businesses in your niche.

The alternative to implementing these steps, unfortunately, may be watching your online business crumble before it's gotten off the ground.

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