Why Do Businesses Fail? The Top 5 Reasons & How to Avoid Them
Dropshipping Success Rate: What Keeps People Back From Dropshipping Success?
Not a day goes by without someone asking me, “Why do business fail? And gow can you personally guarantee that I'm going to succeed with this business?”
I can’t guarantee that at all. And you shouldn't trust anyone who says they can.
There is no 'set' dropshipping success rate. The truth is, there are a lot of reasons why business fail.
That’s why in this blog post I’m going to cover the five biggest reasons how people fail at dropshipping, and how you can avoid it yourself. Honestly, if you fall into any of the below categories, I can guarantee you are going to fail at this business.
This blog post is also available in video form. Click ‘Play’ below to start watching! Make sure to subscribe to our YouTube Channel for weekly updates and insights!
Why Do Businesses Fail?
So, quick note before I get into this list of the five reasons why... This blog post on why do businesses fail is not for the people that think they failed because they made a Shopify account for free once and never did anything, and didn't get results and said, "I failed."
That doesn't count, this advice isn't for you.
This one is for the people that are actively building dropshipping stores to help them understand the reasons why they might not be seeing the dropshipping success that they want to.
These are reasons I see all the time from different emails I get, and honestly, I'm guilty of some of these myself.
Selecting a Bad Niche
You Don’t Find the RIGHT Suppliers
Not Having Excellent Customer Service
Reason #1 Selecting a Bad Niche
So why do businesses fail? The first reason is because someone gets started selling the wrong type of product.
There’s a whole bunch of characteristics that make a niche good for dropshipping. Here are a few easy wins for bad ones to stay away from:
What I mean by restricted products are either illegal, or border that gray area. These products might be legal to sell online in some states, but you won’t be able to run ads the traditional way.
Certainly not with Google Ads, and most likely won’t be able to them on Facebook or any other main platforms that drive traffic.
So, an example of this that I've seen a ridiculous amount of times over the past couple years is CBD oil. You know, the stuff that's from ‘hemp’ and is supposed to make your joints better.
A ton of people want to dropship that for some reason. Which okay, if you want to try it, try it. But guess what? You're not going to be able to advertise it with traditional Google shopping ads.
And you're not going to be able to run traditional Facebook Ads. This type of product just limits you so much.
Now, another thing that people do that sets them up to fail, which I guess someone was teaching this a few years back. I mean, they must've been. Because people, for some reason, think they can dropship copyrighted and trademarked products.
You know, I've mentioned this before, but you see these websites that sell Game of Thrones sweaters and pillows, and all this stuff. I wish I could tell those people, “You're not authorized to sell that, you probably shouldn't do that, and guess what?
You're going to fail if you try to sell something that is copyrighted or that's trademarked that you're not allowed to sell."
So, a few big reasons people fail start early on with niches. These two above are the most glaring examples I see regularly.
Reason #2 You Don’t Find the RIGHT Supplier
Now, another reason why businesses fail is if they have bad suppliers or don't find the right suppliers.
Take for example the arbitrage model. That’s where you try to buy low and sell high.
Imagine that you’re selling digital pens on Shopify. And your supplier is some person you saw selling digital pens cheaper on Amazon or eBay.
Now that would be a reason to fail. With suppliers like those, you don’t actually have real suppliers. You're just kind of randomly trying to find these little deals here and there. That's not a lasting business model.That's a big reason dropshipping businesses fail.
Does Dropshipping From China Work?
Something else that would fall into bad suppliers is if you're exclusively dropshipping from China to the states. Or to any other country where it takes three weeks, and people get a package with a whole bunch of foreign lettering on it.
Again, not saying it's impossible to make money with the dropshipping from China model, but it's some big reason people fail.
When you have suppliers that are located as far away as China, if somebody gets something three weeks later, guess what? They're not gonna be happy, unless it's something really worth waiting for.
Based on the amount of negative press that dropshipping from China has gotten over the past couple years now, and not just in our communities, but in mainstream media, it's definitely having more and more of a negative association with it.
So, having suppliers that come directly from China to your customers in the states, not a good idea.
I have nothing against having products made in China. We've done plenty of that, but at least have them in a warehouse closer to the customer.
That they can get there in a reasonable amount of time, so that they can be repackaged, and the customer could have a good experience. So that you can have a lasting successful dropshipping business.
Bad Supplier Relations
Now, something else that would fall into bad suppliers is bad supplier relations.
Take the digital pen example from earlier. If you’re selling these digital pens, and find suppliers in the a few suppliers in the States. Great, you get approved to sell their products, and you start selling them.
But then you might realize that maybe one or two of your new suppliers has terrible customer service! (In this situation, you’re the customer!)
So maybe these bad suppliers don’t respond to your emails, or ship your orders days or weeks late. Maybe they ship it to the wrong customer address over and over again, maybe they add on extra fees for dropshipping.
There's all these things that even domestic dropship suppliers can do that will really hurt your business if you continue to work with them.
A side note on this, if you're reading this video and you're part of my Drop Ship Blueprint, that's the course that was voted “Best eCommerce Course” by Shopify, go into the section where I'm talking about bronze, silver and gold suppliers. That's where I show you how to weed out those that will hurt your business. If you have enough of them, and if you work with them long enough, they will be a reason your dropshipping business fails.
Bad supplier relations or just bad suppliers in general, is definitely something to be cautious of, even if you are following the Drop Ship Lifestyle model and working with domestic suppliers.
Reason #3 Unprofessional Websites
Now, the third reason that people fail at dropshipping is their websites are just unprofessional.
What do I mean by that?
By that, I mean, a dropshipping site that just looks like a joke. Something that was thrown together in a few hours.
You can spot these websites if there are typos all over the place, broken links, clunky checkout process, or no way to get in touch with someone.
One of the biggest parts of a successful dropshipping businesses is being trustworthy. That way you can build trust with your visitors so they are more likely to buy. There’s many ways you can do this.
If you throw a website together and don't really have a system to follow, or you don't know what you want it to be, you’ll most likely be left with an unprofessional website. Then when you start sending traffic and no one buys, you don’t have to wonder why wonder why. That's a big reason why, okay?
Again, if you're part of Drop Ship Lifestyle and you're reading this, go through all Modules Three and Five in my Drop Ship Blueprint. That's where I show you everything we do to build dropshipping websites that are optimized to convert.
Then in Module Five, I give you a whole bunch of extra things we do to our websites and our product pages to make sure it's professionally designed. This will make sure you hit the conversion rate that you need to succeed at dropshipping.
HOW TO START
YOUR OWN BUSINESS
WITHOUT PRIOR KNOWLEDGE OR EXPERIENCE
Reason #4 Not Having Excellent Customer Service
For me, when I was first starting to scale my businesses, I really struggled with providing great customer service.
Let’s say you did everything else right. You have a good niche and great suppliers. Your website looks awesome. You’re getting good traffic and people are buying.
Now, as you scale, you’ll start to realize you can’t handle the customer service yourself anymore. There are just so many orders coming in. Which means more inquiries coming in…
That means there’s so many more things and tasks that need to be taken care of on a day-to-day basis.
To be successful at dropshipping, you need to be able to put systems in place and get some extra hands.
Usually, we work with virtual assistants (VAs) for these roles, you could also outsource projects big and small.
If you're currently feeling like it might be time to hire a VA or start outsourcing some of your business tasks, read our Ultimate Guide to Hiring Your First Virtual Assistant. It has EVERYTHING you need to know to ensure you hire the right person to grow your business and give you more freedom.
If you don't maintain a great level of customer service as more and more sales come in, those people won’t buy from you again. They won’t recommend you to others. And they’ll leave you bad reviews.
Having great customer service is a HUGE contributor to your dropshipping success rate. When you think, why do businesses fail? A lot of time, in the present and past, it's been because of bad customers.
Make sure as you make more money and scale, customer service goes with the business. That these two grow together.
In the beginning, I recommend doing everything yourself, if you’re not already.
So it falls on you to provide great customer service. That means emailing people back when they email, answering the phone if someone calls, and especially responding to live chats. Just put the app on your phone and respond to people like it’s a text message.
Offer great customer service and you won't fail at your dropshipping business, okay? If you don't offer that and people start to feel like you don't care about them, then they're not going to give you their money. And that means you're going to fail at dropshipping.
Reason #5 Fixed Mindset
This next reason to answer the question, "Why do businesses fail?" is mostly for those that a little further down the road.
Let’s say, you’re doing all of the above right. Niche, suppliers, traffic, website, customers, all of it is amazing.
From there, the biggest thing that I see leads to decline, and ultimately failure of businesses, is getting into a fixed mindset.
I’m one of those people that believes if you have a business and it’s not growing, it will start to decline. I don’t believe there’s this equilibrium that you can get at and just maintain forever. That’s not really how things work.
The way you can think about this is having a growth mindset versus a fixed mindset.
What happens to a lot of new entrepreneurs that build a business that starts to make them $10,000 a month net profit or more. At this point, they might be extremely, extremely, comfortable with that.
That amount is making them way more money than they made at their old job. They're able to travel now. They have more freedom. They have more time. Life is good.
Because of that, they're there, right? They think they made it, and they did, that's great. You know, making $10,000 take home a month is amazing. But if you're there and you're coasting, then you can't coast forever. It will go down, and it'll be nine. Then it'll be eight. Then it'll be seven, then six...
Unless you're working on having it growing all the time, then eventually you will fail if you give it enough time of just coasting. Maybe that's five years, maybe that's 10 years, but eventually you will fail.
How do we combat that? How do we not have a fixed mindset? And how do we switch to a growth mindset?
Well a big part of it is taking some of those profits and reinvesting them into growing your business.
Whether that's through new content, increasing your ad budget, or joining Masterminds to learn more there. Whether that's through opening up new ad channels you haven't used yet or hiring a team.
You need to have that mindset, and you need to be putting money back into your business. Even if you've reached what you think is your peak or what your goal was, it's not going to stay like that forever.
If you're not growing, you will die, you will fail.
I’m not saying go nuts and try to quadruple your business every year. Which in the beginning you definitely could… But some of those profits and reinvesting themover time make sure growth is something that's always on your mind. Allow it to be a big role of what you do in your business.
BONUS #6 Lack of Persistence
Now, I’m going to give you a sixth reason on how do businesses fail. Count it as a bit of a bonus.
Lack of persistence is something I’ve seen hold back so many potential success stories. This tip should help those that experienced any kind of set back and felt like giving up.
Listen to me: setbacks are real. I can’t even count how many setbacks I've had personally.
Sometimes I'll be having conversations and something will spark a memory of something I did wrong or messed up in a business many years ago. Then it's like, "Wow, I totally forgot that happened." Because when it did, it was a huge deal at the time.
The reason that I could even forget these things is because so many of them happened, right? We have setbacks, and being persistent is key in actually not failing.
That’s why I'm going to share with you some screenshots from members of Drop Ship Lifestyle. These all came from our private Facebook Group. I searched the word “fail” because I wanted to see what our community has to say about this.
Most people that mentioned the word “fail” or “failure” were talking about how to overcome it and how they have.
This first post below is from Lasina. I’ve highlighted the biggest takeaway:
She talks about some things that she's experienced since launching her dropshipping store. Again, she experienced failure in the past. But now she's posting her $71,445 month in sales. On the day that she posted this, she got three orders for a total of $3,680!
Again, somebody that experienced failure, but she persisted!
If you're the type of person that gets motivated by seeing these stories and you're part of Drop Ship Lifestyle, definitely go through our Facebook Group. There you’ll see a ton of our success stories. Many of which come from people that experienced failure at first– but persisted.
The one that I’m going to share now is from Joey. He's saying when he built his first store he failed horribly in a crowded niche.
Remember, niche selection is important. However, further down in his post about why do businesses fail, I’ve highlighted where he said one year from when he initially bought his second domain, he turned Google product listing ads on and in 61 days he crossed $100,000 in sales.
His post starts, "I failed horribly," and ends with his second story of crossing $100,000 in 61 days.
Yes, that's revenue profits, probably like $25K! But he was able to do that after failing and not giving up.
I'm going to share one more, because I know people do get motivated by this, and I understand why. You might be experiencing some failure right now, but again, persistence is key. This post is from Issac. He's saying that the first store that he ever built failed.
Then he has a new store that he's been running and building for the past four years. He just sold it for a very good amount of money.
That success was a result of him pushing through everything bad and the things didn't work. The good news is his new store is performing two times better than it ever has.
He's made a great exit when he sold it and the new owner is super happy. Of course, Isaac is super happy, because now he has this bank roll and he's onto building his next business.
To wrap up this bonus tip on the reasons why do businesses fail: Be persistent.
Make sure you have all the fundamental elements in place! From there, persistence is what's going to make sure your dropshipping business never fails.
If things start to feel a little bit weird, or things start to dip, persistence is what will make you adjust and be able to bounce right back and breakthrough any previous barriers you've been at.
To Recap, Why Do Businesses Fail?
"Why do businesses fail?" is common question that I hear often, but I can’t guarantee you’ll be successful at dropshipping. The only thing I can guarantee, is how you will fail and that’s if you fall into any of the six categories above.
To recap, avoid this when dropshipping:
Selecting a Bad Niche
You Don’t Find the RIGHT Suppliers
Not Having Excellent Customer Service
Lack of Persistence
If you found this list about why do businesses fail helpful, please do let me know in the comment section below. I’d love to hear your thoughts.
Tell me about a time where you failed at something, but found success once you persisted through it!