Business planning

5 Common Reasons Online Businesses End Up Failing

online business

The world has moved far beyond “build a website and they will buy”. You’re competing against millions of other websites, many of which are trying to sell similar products or services to yours. But the sheer number of online businesses means it is quite possible to succeed online. Let’s look at the five most common reasons why online businesses end up failing.

Assuming a Website Is Enough

There are online businesses that assume setting up a website is enough. This may be enough for brick and mortar businesses angling to be found in online searches, but for online businesses, your website is your business. It has to present products for sale as enticingly as if it were putting products in the store window for passersby to appreciate. It must process orders in such a streamlined manner that it doesn’t lose a single customer in the conversion process.

Bad Math

Bad math kills many businesses that at least manage to generate some revenue, whereas lack of revenue kills all of them. Some online businesses fail because they don’t price their products properly. They sell items with too narrow a profit margin to pay for operating costs, cannot raise them, go into debt and eventually become bankrupt. They sell a few high volume items at low prices hoping to sell enough other items at a higher profit margin to break- even but don’t pay attention to the profit mix and lose money until they bleed to death. They don’t keep track of the sales taxes they are required to pay or take transaction fees and selling fees into account and lose money. A proportion of businesses don’t take income taxes, inventory taxes, business taxes and others into account and fail after running into tax trouble. In short, their bad math kills them.

Poor Performance

If the dot-com boom and bust of the 1990s and early 2000s taught us anything, it is that an idea poorly executed no matter how much money is behind it will fail. An online business will fail if it offers an amazing product but takes too long to send the product to the customer compared to its competitors, makes mistakes in orders or has poor customer service. A beautiful website that has errors when it loads will deter many potential customers, and if it isn’t found in online searches, it might as well not exist.

No Revenue Model

You have a domain, everyone’s heard of it. Now how are you going to monetize it? The original dot-com boom also taught us that a slick marketing campaign without a good product or service behind it will fail. You have to have a plan to monetize the site before you go live and start generating money as soon as possible, even if it is only advertising revenue generated by visitors to read your content as you try to set up affiliate marketing deals.

Even if your site simply sells two or three items as it studies the customer segments it attracts before adding more offerings, you must have a revenue model to succeed. On his podcast, Tai Lopez promotes a book of the day free of charge to listeners. Yet it is a lead-in to his paid-for business content and books he’s written himself. The free podcast and his website are used to sell content people pay for.

No Marketing Plan

We’ve already mentioned how a website that isn’t found by its customers is doomed to fail. It isn’t enough that your website is well known if it isn’t known to your ideal customer demographic. Marketing doesn’t matter if it doesn’t convince people to buy your product. Your online business, just like a brick and mortar business, needs a marketing plan, both to increase its visibility to your ideal customers and convince them to buy from you.


Setting up a website is not enough to call yourself a successful online business. Your business must have a plan on how to use the website to generate money, and you need to know how to promote the products or services you offer through the site. Online businesses fail when they don’t price their products properly or plan for the expenses they need to pay. Businesses that fail to deliver on their promises to customers will fail.

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