As starting a business emerges as a key New Year’s resolution for Brits in 2025, experts have revealed the most common reasons startups fail and how to avoid them. The experts at money.co.uk business credit cards have analysed survey data about common causes of startup failure – with lack of financing and investment ranking top.
The most common reasons for startup failures:
|
Rank |
Reason for startup failure |
Percentage of respondents |
|
1 |
Lack of financing/investor |
47% |
|
2 |
Running out of cash |
44% |
|
3 |
Poor timing |
21% |
|
4 |
Legal challenges |
19% |
|
5 |
Lack of a business model |
16% |
|
6 |
Product not user friendly |
9% |
|
7 |
Market competition |
7% |
|
7 |
Pricing/cost issues |
7% |
|
7 |
Lack of demand for product |
7% |
-
Lack of financing/investor – 47%
A lack of financing and/or investors is the most common reason for business closures, with almost half of failed business owners stating this as one of their main reasons. To secure finances to help you get your business up and running, you can apply for a business loan or take advantage of the finance schemes many councils offer.
Many councils also offer assistance and coaching, as well as financial assessments to help determine project earnings and outgoings in your business plan.
-
Running out of cash – 44%
Running out of cash is the second most common reason for failed startups, at 44% of unsuccessful entrepreneurs. Running out of money means you can’t buy new stock, pay staff, or realistically keep the enterprise going.
Creating a strong cash reserve is key to cover you for any financial downturns. To do this, you can borrow money responsibly, such as via a business credit card, and regularly monitor your cash flow. Upselling and getting payments in advance are also great ways to increase the cash flow.
-
Poor timing – 21%
Poor timing is the third most common reason for business closures (21%). Launching a business at the wrong time for the local economy or relevant market can significantly impact the demand for your products and services and the likelihood of success.
It’s crucial to take these factors into consideration when putting your business plan together, including historical market data, to give your startup the best chance of survival.
Kyle Eaton, money.co.uk business credit card expert, offers his top tips on what to consider before launching your own startup in 2025:
“Establishing your identity is a crucial part of starting a business. It’s important to understand what your brand wants to represent, how your brand wants to be seen, and what you can provide for your customers.
“Lack of funds and running out of cash are two of the biggest reasons businesses fail, showing just how vital this step is. It’s so important to consider the costs of everything, from websites to staffing. Make sure you do your research to understand not only how much you’ll need but also where and how you can source your funding.
“Is there a demand for your product? This is something you need to establish in the early phases of developing your business. This will help you market and advertise your product, as well as understand exactly who your target audience is. You need to think about the problems your products or services will solve and why your customers will want to return.
“The most important thing to remember is to do your research to create as strong a business plan as possible to give your business the biggest chance of surviving. Research and preparation also play a huge part in securing funding and setting your enterprise up for success.”