Insufficient Capital

Many new business owners underestimate how costly it can be to open an enterprise, while overestimating how much revenue their business will bring in during the first few months or years. Applying for business licenses, purchasing liability insurance, leasing a storefront and stocking inventory can cost thousands of dollars. You'll also need to outfit your location to suit your business needs -- registers, mirrors, counters or display cases -- and pay employees. To avoid business failure, set aside sufficient funds to see you through one or two years of business until you begin recouping investments through sales revenues.

Poor Planning

It's not enough to develop the best recipe for homemade doughnuts and then expect your new bakery business to take off. Another major reason for business failure is lack of planning. Developing a detailed, well-researched business plan before opening the door for commerce is crucial. Business plans should outline research completed on local industry competition, identify capital sources, describe production or revenue targets for the first several years, outline accounting procedures, include a checklist of all legal and financial obligations and set hiring, management and firing policies. Advance troubleshooting during the planning stages helps offset the challenges your business faces after opening.

Unrealistic Expectations

Some new businesses fail because of the owner's unrealistic expectations. Well-intentioned entrepreneurs may open a business with the idea that they're going to get rich quick, be their own boss or enjoy more spare time if they're not plugging away at a 40-hour office job. Opening a business often requires very long hours and strong dedication during the early stages. It will still be necessary to develop and maintain positive, respectful relationships with vendors, clients and other professionals, such as health inspectors or business accountants. Instead of hoping to get rich, focus on opening a business because of a genuine passion for the product.

Location

You've heard it before: location, location, location. Even the best-laid plans for new businesses can succumb to failure if the location isn't right. Cramped storefronts, inaccessible parking, unsafe neighborhoods or a lack of pedestrian traffic can mean that your business doesn't attract enough clients to succeed. Instead, choose a location near complementary businesses with plenty of foot traffic, convenient freeway or street access, a safe neighborhood and well-maintained building. When possible, choose locations where the historic or present community receptiveness to your product is strong. For example, a new art gallery might thrive in a city's bustling arts and dining district but fail in a commercial shopping mall.