Why Most Online Businesses Fail? 25 Critical Issues to Avoid

April 23, 2024

Why Most Online Business Fail

Why do most online businesses fail? Here are some of the main reasons you can fail:

  • Lack of basic business knowledge
  • Failing to commit to your business
  • Operating a poorly developed website
  • Skipping marketing research
  • Not adapting to the fierce competition
  • Not setting goaps and milestones
  • Not creating SOPs
  • Lack of good customer support
  • Not taking action
  • Not adapting with marketing changes over time

90% of online businesses fail in their first 120 days of operation. The main reasons for this are not doing enough research, underestimating the competition, and failing to adapt to the ever-changing online landscape. Online business differs greatly from offline businesses. That’s why if you’re a business owner or an entrepreneur, knowing why most online businesses fail and how to avoid it is a crucial step for success. 

In this article, we’ll inspect the 25 most common issues that lead to small business failure online. We'll look at why these issues are so critical, what happens when you ignore them, and the exact steps you can take to start a successful online business. 

1. Lacking Basic Business Knowledge

Basic business knowledge helps you steer clear of mistakes like overspending or getting into legal problems. Too many aspiring entrepreneurs go in with the idea that online business is nothing like traditional business. While that is true to an extent, the fundamentals of starting and running a business are the same. Knowing these basic business concepts helps prevent business failure:

  • Supply and demand
  • Accounting principles
  • Cash flow vs profits
  • Target market pain points
  • USPs - unique selling points
  • Marketing fundamentals
  • Business ethics
  • Copyright and trademark laws
  • KPIs (key performance indicators)
  • Risk management

2. Failing to Commit to Your Business

Failing to commit time, effort, and money into your business is a big reason people fail. A lot of people start online businesses as a side hustle. It can work that way, but you should never have the mentality that it's just something on the side. You can do this by:

  • Commiting Time: Setting aside hours to work on your business helps you get things done quickly. Too many people say they'll work on their business "later." Without set hours, people tend to delay, which ultimately leads to slow or no progress. 
  • Commiting Effort: There is no copy-and-paste online business. It's also very difficult to just hire people to build a business for you. Putting the effort yourself into learning and growing your business is the key to success. People who are lazy and want quick solutions usually fail in online business. 
  • Commiting Money: Spending for a website, advertising, and hiring VAs are important steps to success. Without these investments, you'll have to work 2x or 3x harder. A lot of people give up because they don't want to spend to get things up and running. 

3. Operating a Poorly Developed Website

A poorly developed website paints your business as unprofessional. You can avoid this by giving your visitors a good user-experience (UX). According to Zippia, 88% of online shoppers don’t return to a website after a bad user experience. They also report that good UX increases a website’s conversions by 200%. 

Good UX on your website simply means making it easy for people to find what they’re looking for. If you’re running an ecommerce website, this means making the whole checkout process simple. Notice how big companies like Amazon make the buying experience super easy with their 1-click checkout. 

4. Skipping Marketing Research

Skipping marketing research allows you to find products that sell, and avoid over-competition niches. You can do this by identifying your target audience, finding their biggest frustrations, and then analyzing your competition. 

  • Identify Target Audience: You can narrow your audience down based on their age range, average income, geographic location, and industry they work in. You don’t want your target customer to be too broad, but you also don’t want to narrow down too much so that only a handful of people can use your product.
  • Finding Frustrations: In business, you don’t just make a product and hope people like it - you first find what people need, and then you make a product around it. Talk with your target audience to find their pain points. This allows you to make informed decisions when developing an online product.
  • Analyzing Competition: Studying your competition, identifying their weaknesses, and finding a unique angle to take makes you stand out from the crowd. It gives your target audience sound reasons to choose you instead of them and sets the foundation for a successful online business.

5. Not Adapting to Fierce Competition

With around 12-24 million online businesses today, it’s impossible to avoid competition. If you don't differentiate your business, it's unlikely you'll survive. To challenge the businesses that are already operating, you can:

  • Price Lower - Offering lower prices is a great way to make customers choose you instead of your customers. It's especially effective when you are still relatively unknown. Some businessmen even go into deficit when starting out just to get their name out there. 
  • Specialize on a Specific Niche - Niching down allows you to tackle specific problems that the big players might not have time for. It's a great way to get customers who need a more customized solution. 
  • Study Their Complaints - Studying the negative reviews of your competition allows you to find gaps in their product or service. You'll know how you can provide a better service and win over clients! 
  • Innovate - Try doing something different from everyone else, and brand yourself as innovative. This should raise eyebrows in your industry, and you may attract curious customers.
  • Do Better at Marketing - Lots of established businesses fail to market to new customers - especially online. You can take advantage of this by learning digital marketing strategies like SEO, social media, or PPC.

6. Not Setting Goals and Milestones

Setting goals and milestones ensures you don't lose focus bigger picture, and prevents burnout. According to Zipdo, one in every three entrepreneurs experiences burnout. It can be very difficult to push through hard times if you don’t even know where you’re going. 

To counter this, you’ll first want to set a specific ultimate goal. It can be something as simple as “make enough money to travel full time.” Or a more ambitious goal like “become the biggest camping ecommerce store in the world.” Once you set your ultimate goal, you can then start creating milestones. Milestones are smaller achievements that show you’re on the right track to accomplishing your goal. 

Sample Online Business Goal and Milestones

  • Business: SEO Agency

  • Ultimate Goal: Build an agency that runs even if you’re 100% hands-off

  • Milestones:

    • Get website up and running

    • Get first client

    • First $10,000/month

    • First $50,000/month

    • First $100,000/month

    • Finding and hiring a brilliant manager

    • Take a 1-month vacation with your business running in the background

    • First client where you’re 100% hands-off

7. Not Creating SOPs

Not creating SOPs (standard operation procedures) forces you to micromanage every single employee, or let them do whatever they feel is right. This creates inconsistency, which can frustrate customers. With SOPs, you can enjoy:

  • Efficient Work - SOPs outline the most efficient way to get a task done. This way, whenever someone new picks up a task, they won’t have to waste any time figuring things out anymore.
  • No Knowledge Loss - Some tasks only pop up once in a while. By documenting how to do is properly in the SOP, you can forget about it for a while and have everything you need once the task pops up once again. Letting your skilled employees contribute to the SOP also ensures that their knowledge stays with the company.
  • Better Onboarding and Training - SOPs make training new employees extremely easy. They can study the document to learn how your business operates, and they can use it as a resource whenever they have questions. 
  • Better Communication - When there are over 3 people in a company, communication can become an issue. SOPs outline how and where to communicate so that all relevant channels get the message. 
  • Consistent Quality - Perhaps the biggest benefit of a SOP is producing consistent quality for your customers. You want to build a good reputation and establish your company as one that people can trust. A SOP ensures that everyone operates at the same standards of quality you have set. 
  • Compliance to Regulations - Depending on your business, there may be several regulations you need to comply with. Having these in the SOP ensures that none of your employees break these regulations. Broken regulations can have catastrophic effects for your company and lead to online business failure. 

Many small business owners don’t feel the need to create SOPs. But if your plan is to scale and bring employees in later on, having these documents is vital for success. It’s a good idea to create these slowly as you go along, so that you can build upon your SOPs rather than having to write everything in one sitting. 

8. Lack of Good Customer Support

Lacking good customer support is not only extremely frustrating for customers, but it can also mean missing out on sales. Zendesk published some alarming statistics regarding this:

  • Over 50% of customers switch to a competitor after just ONE bad customer service experience
  • 73% of customers switch to a competitor after several bad customer service experiences
  • 75% of customers say a bad customer experience ruins their day
  • More than 50% of customers say they feel stressed and tired when dealing with customer service
  • Nearly 90% of customers say they'll switch to a competitor if it provides better customer experience

This highlights the importance of putting customers first, listening to customer feedback, and providing good customer support. And it's not enough to just hire any customer service rep either. Bad customer service representatives can cause just as much damage as having no customer service rep. 

9. Not Taking Action

Failing to take swift action can lead to unhappy customers, the competition overtaking you, and losing sales. 

  • Whenever you receive customer complaints, it's important to address it right away. This can be giving them discount coupon, or even replacing the product altogether. This will not only prevent them from spreading a negative review, but you might even turn them into a loyal customer. 
  • If you find your competition gaining ground, you must analyze why asap. You don't want it to reach a point where your competition is overwhelmingly better than you. As soon as something new comes up, take action and study it to see if it's good for your business.
  • If you get a lead for your service business, reaching out immediately is how you can take action. There are lots of potential customers who are still on the fence of buying. If you take the initiative and reach out, you can close a lot of otherwise lost deals. 

10. Not Adapting with Market Changes Over Time

Failing to adapt to market changes is another big reason online businesses fail. Here are three of the biggest market challenges you need to adapt to today: 

  • The Rise of AI - Almost overnight, any content job that didn’t require creativity or precision became obsolete. AI has also filled the internet with a lot more content than there was before. This massive wave of generic AI content is pushing online businesses to be more authentic in their branding. 

  • Market Saturation - Since the pandemic, a fresh wave of entrepreneurs and businesses have taken to the online world. Ecommerce stores now have to compete with loads of dropshippers, Amazon FBA sellers, and even foreign ecommerce stores. Service providers have to compete with freelancers who charge much cheaper. This competition is forcing online businesses to niche themselves down. Or to establish themselves as an authority brand. 

  • Cyber Security - Many people are reluctant to provide confidential details online. Once in a while, a big data breach story comes out in the news, causing even more fear and distrust. These increasing skepticism is pushing online companies to get security certificates. Ensuring people’s privacy is essential, especially if you’re asking for their credit card details. 

11. Selling a Poor Quality Offer

Selling a poor quality offer online is no longer something you can get away with in 2024. To avoid this, produce something solves a problem for your target audience. Below are some questions to ask about the quality of your offer. If you can honestly answer these with “yes,” then your offer is decent. If any of your answers is “no,” you should consider adjusting your offer. 

  • Is there a real demand for this product?
  • Will this really solve my target audience's problems?
  • Are there good reasons to choose my product over my competitors? (better, cheaper, more accessible)
  • Is my product legal?

12. Overpricing or Underpricing Your Product

To avoid overpricing or underpricing your product, find the actual cost of your product, then consider profit margins. Here's an equation you can use:

Target price = (Variable cost per product) / (1 - your desired profit margin as a decimal)

Variable cost per product includes raw materials, labor costs, overhead costs, and time costs (your per hour rate). For profit margins, 5% is considered low, 10% average, while anything over 20% is considered high. 

Deduct your profit margin (as a decimal) from 1, then divide that by your variable cost per product. This will give you a target price. For example, if your variable cost per product is $20, and your desired profit margin is 20%, your target price will be 

Target price = $20 / 0.8

Target price = $25

You also have to take the market price into account. You don't want to overprice your product because you'll have a hard time getting customers! 

Service businesses are much easier to price. You just have to figure out an hourly rate that works for you.

13. Poor Inventory Management

Overstocking or understocking your inventory leads to loss of sales or cost overruns. Here are some ways to improve inventory management:

  • Remember the 80/20 Rule: Tracking your sales usually shows you that 80% of your profits comes from 20% of your products. Making sure your hot sellers are well stocked ensures you don't lose sales. While not overordering your slow sellers helps prevent cost overruns. 
  • Analyze Your Suppliers: Choosing suppliers who provide high-quality and deliver on time will boost your business. You shouldn't rely on only one supplier. If their performance is poor, keep your eyes out for better suppliers. 
  • Using Inventory Software: Inventory software makes tracking your stocks much easier. You'll always know when stocks are low, which products aren't selling, and where exactly the products are. The bigger your business grows, the more important having good software becomes. 
  • Have an Inventory SOP: Having standard operating procedures when tracking inventory makes studying the data easier. You can clearly see where you're lacking, and where you have too much stock.

14. High Shipping Costs

You can reduce your shipping costs by using flat rate shipping, reducing the weight of your product, and using third-party insurance. 

  • Flat shipping rates means choosing a set price by weight, package size, or shipping distance. Using flat shipping rates reduces variables, and makes for a better customer experience.
  • You can reduce the weight of your product by using corrugated boxes or polymailers. You can also use lightweight packing materials to fill any gaps in your packages. 
  • Third-party insurance is often significantly cheaper than the insurnace of shipping providers. It may be less convenient to claim, but you can save significant amounts of money by going third party. 

15. Not Investing into the Right Digital Marketing Strategies

The best way to gain customers online is investing in digital marketing strategies like SEO, social media, or email. It’s a good idea to focus on one or two when starting out. Each of these online marketing strategies has pros and cons:

  • SEO or search engine optimization works by optimizing your website to show up on search engines for relevant keywords. This way, whenever someone types the product or service you offer in Google, your website will be the first to show up. SEO is great for generating organic leads. It takes longer to see results (minimum 6 months), but once your website is ranking, it will bring in new leads and customers on autopilot for you.
  • Social media marketing uses a mix of organic and paid strategies to get leads and sales. It’s a great marketing channel since it also lets you build a powerful brand. Optimizing your profiles, making valuable or entertaining posts, and communicating with followers is a great way to do this. You can also use the advertising tools in these social media platforms to spread word of your products quickly.
  • Email marketing has the highest ROI of all online marketing strategies, with $36 earned for every $1 spent. It works by first building an email list. You can take the emails of your customers, or you can create a lead magnet. Once you have email lists, you can then send series of emails to keep customers in the loop. You can also promote your products, or just share valuable information so people enjoy reading your emails.
  • Google PPC or pay-per-click is a paid advertising method. Instead of SEO, you can pay Google to put your website at the #1 result for queries related to your business. This is one of the fastest ways to get customers. However, it requires careful accounting, since you may end up spending more than you make back.
  • Influencer marketing works by paying a popular person in your niche to promote your products, usually on social media. This is a cost-effective way to reach many potential customers. The most popular influencers today charge huge fees. That’s why it’s a good idea to find a less-popular account that your target audience follows. This way, even if they don’t have a million followers, you’re likely to get good leads from them.
  • Affiliate marketing is a great way to get established websites to promote your products. Affiliate marketing works by providing special tracking links to affiliates. And then paying them commission if anyone buys your product using their affiliate link. There are plenty of online marketers whose entire business is selling affiliate products. Creating an affiliate program allows you to tap into their online marketing efforts without paying them upfront.

16. Not Utilizing SEO

Making SEO tweaks like targeting good keywords, hitting search intent, and adding your keyword to the right places helps new customers find you. Here are some small changes you can make to get more website visits:

  • Target good keywords by finding what your audience is searching for, then creating pages on your website targetting that. You can use keyword research tools like Keywords Everywhere, Mangools, or Ahrefs to find what people are searching for. Use these keywords in your page titles, and write some content about it. Done right, this will make your website appear on Google whenever someone searches for these keywords.
  • Hit the search intent by making sure you write content that people are looking for. You can do this by putting yourself in the shoes of people searching these keywords. Or you can have a look at what's already ranking on Google for the keyword. This will give you an idea of what your content should look like. 
  • Put your keyword in the right places by adding it to your title, meta description, and introduction. You want to make sure it appears here naturally, not forced. This helps Google categorize your page, and helps it rank for the right keywords. 

Even if SEO isn't your main marketing strategy, these small tweaks can help a lot. It takes 6 - 12 months to start ranking for keywords. But once you rank, you can enjoy organic traffic and leads on autopilot!

17. Having No Social Media Presence

Having a social media presence shows professionalism, allows people to contact you easily, and can gain new customers. Here are some tips to get started:

  • Find Where Your Audience Is - Entrepreneurs like using LinkedIn, older demographics are active on Facebook, younger demographics are on Instagram. Before choosing a platform, find where your target market hangs out.
  • Optimize Your Profile - Make people know exactly what you do or sell by putting it in your page name, profile banner, and description. You also want to link to your website, add your opening hours, and give the best description of your business.
  • Answer Messages - Answering messages you get on social media increases customer satisfaction and can drive new sales. Lots of people prefer to contact companies through social media. By answering inquiries here, you are boosting your customer experience. 
  • Post Regularly - Posting updates, product showcases, or anything relevant shows potential customers you are active. It also keeps your brand on their feed regularly, so they don't forget you! Finally, regular posting can also gain you new followers
  • Advertise Sales - If you're running a sale, paying for social media ads will help spread the word quickly. You can run ads regularly, but they're especially effective if you have a special offer. This is a great way to spread brand awareness and get new customers.

18. Lack of Proper Branding

Proper branding separates you from competitors, helps attract new customers, and builds brand loyalty. You can do this by choosing your logo, colors, and styles of your website. It’s also important to come up with a strong vision and mission message that resonates with your target audience. Here are some examples of good branding: 

Alfred Coffee Homepage

Designer: Coffee is one of the most competitive industries today. Alfred Coffee built a successful business thanks to their strong following. Alfred Coffee uses their unique designs to build brand loyalty. This works since their customer base is in Los Angeles, a hub for art and culture. In every aspect of their business and online presence, you’ll find their catchy artwork. Alfred Coffee has several physical locations, but they also sell coffee beans, mugs, and other accessories online. 

Stellar SEO Homepage

Futuristic: Stellar SEO leans heavily into their futuristic branding. Their target audience is “growth-minded companies.” Nothing captures this mindset as well as a neon rocket shooting through outer space. This branding works extremely well since SEO and link-building are strategies that many traditional businesses will feel are very futuristic. 

Hypefury Homepage

Familiarity: Hypefury is a SaaS tool to help people grow and monetize on X (Twitter). This is why they chose branding that’s very similar to Twitter’s. They want their target audience to feel at home in their platform. They use blue as their theme color, and a bird as their logo, two things people attribute to Twitter. 

19. No Customer Retention Strategy

According to HubSpot, acquiring new customers is 5x more expensive than retaining customers. There’s also a 60 - 70% chance of selling to existing customers. Whereas the conversion rate for new leads is only 5 - 20%. Here are a few strategies you can use to keep customers better:

  • Provide Great Customer Service - 89% of companies say that good customer service is critical for customer retention. A bad customer experience can turn away, even if you have a magnificent offer. That’s why prioritizing customer satisfaction is very important for your success.
  • Create a Loyalty Program - Offering discounts for repeat customers is a great way to get them to stay. Offering big rewards can even push them to buy more than they would’ve without it.
  • React to Customer Feedback - Getting customer feedback is precious. It helps you see areas to improve that you might not have known about. Also, making the changes customers suggest is a great way to show you care, ‌increasing retention.

20. Underestimating the Time Commitment

The time to become successful online varies on how many hours a day you work, your industry, your niche, and more. Here are some examples of how long it took to become successful for popular online business models:

Henrik Powers Reddit

Ecommerce: Henrik Powers on Reddit says it took him around a year to get $30,000 in revenue. He also goes over how much he had to invest into his business to make it work. Henrik says ecommerce is a numbers game, and those with more capital can gain success faster. 

Digital Marketing Agency: Starting a digital marketing agency requires very little overhead. However, it’s a business that requires a lot of skill to work. Ggildner on Reddit says his agency was profitable from the first month of operation. But he also says it largely depends on your skills and communication. 

SaaS: SaaS is a business model that largely depends on how good your idea is. It’s also a business where having more developers allows you to build bigger and better products. That said, JamieK, a solo programmer, shared his earning progression from his SaaS side hustle on Reddit. It took him 5 years to break into 5-figures/year. 

21. Not Tracking Data and Adjusting to It

Tracking your data like ROI, CAC, CLV, Churn Rates, and demographics helps you adjust your strategy accordingly. This helps you avoid inefficiences, lost sales, and overspending. 

  • ROI: Calculating the ROI of your marketing efforts will show you if it’s worth it or not. You want to go for cost effective marketing strategies as much as possible. If you’re spending too much for low ROI, it might be time to switch up your marketing strategy.
  • CAC, CLV, and Churn Rate: Customer acquisition cost, customer lifetime value, and churn rate are three metrics you should know. This helps you see your business's weak points and lets you optimize it.
  • Customer Demographics: Sometimes your target audience isn’t the one who buys! Monitor your customer demographics, because you may find patterns in buyer profiles. If you find a mismatch, switching up your marketing can drive in more people who actually want your product.

22. Not Optimizing for Mobile

According to Exploding Topics, 55% of website traffic comes from mobile. And 73.1% of web designers say non-mobile-friendly design is why people leave a website. All of this points to the importance of optimizing your website for mobile. 

The good news is that optimizing for mobile is easy. Most website platforms today, like WordPress, are mobile-friendly by default. Unless you customize your theme, it should work perfectly on phones. If you want a highly customized website, it’s best to hire a web developer to ensure it runs well on mobile.

23. Starting with Insufficient Capital

Many aspiring online business owners don’t calculate their cash inflow and outflow properly. You need to calculate the cost of running a website, the tools you’ll use, any employee you’ll hire, and your marketing expenses. Some online business models allow you to start with very little overhead. However, you’ll still have to include your monthly living expenses if you plan to do this full time. 

24. Relying on a Single Revenue Stream

Relying on a single revenue stream for online business is a bad idea because a single revenue stream can get wiped out overnight. That’s why once you’ve built up income, diversifying is critical. Here are some popular ways online businesses can diversity:

  • Ecommerce = Diversify your product offerings. Find other products your target audience needs.
  • Digital Marketing = Don’t offer only one service (ex: SEO only). Diversify your services to include many online marketing channels
  • Course Creation = Offer coaching programs for your students. If you’re a coach, you can also do the reverse and create a course to diversify
  • SaaS = Develop complimentary products for your major program
  • Content Creator = Get as many revenue streams as you can such as ad placements, affiliate products, getting sponsors, etc.

25. Hiring The Wrong Employees

Hiring the wrong employees is expensive, time consuming, and can damage your brand. You can improve your hiring process by:

  • Providing Detailed Job Descriptions - Outlining all expectations avoids employees getting overwhelmed by the workload. Spend time to think out what exactly the position is and the roles the employee needs to fill. The more detailed you are with the job description, the better your chances of matching with the right person.
  • Hiring Only What You Need - You can save money by only hiring when there's a real need, rather than hiring to fill a position. You don't need to hire two virtual assistants for each task, when one can easily do both. If you're having trouble finding work for an employee, you might have overhired. 
  • Avoiding Cheap Labor - Hiring cheap workers from overseas leads to poor quality output, unreliability, and high turnover rates. You can hire employees overseas for as low as $4/hour. However, it's better to spend more for better work and more employee loyalty.  
  • Looking at Their Previous Work - Looking at a potential employees past work shows you what they can do. Avoid looking at diplomas or certificates, since this can easily be faked. 
  • Asking for a Video or Voice Recording - Seeing the face and hearing the voice of a potential employee ensures they communicate well. AI tools like ChatGPT allows anyone to write in perfect English. By asking for a video or voice recording, you instantly screen out hundreds of people who can't communicate well. 

How Can Online Businesses Avoid Critical Issues and Succeed?

Proper research, studying data, and adjusting strategies is how online businesses can avoid critical issues and succeed. A lot of the reasons online businesses fail is because of improper research. People find a shiny idea, then try to make things work without studying it first. They also go in unaware of the many pitfalls in their way. By reading this article, you’re now aware of what you need to look into before starting. 

Studying data is crucial for long-term success. No matter how well you research, there are going to be surprises in your journey. That’s why it’s so important to collect data - these are the raw stats that make or break your business. It will show you what’s working and what isn’t.

Adjusting your strategies is the response to studying data. Analyzing data is no use if you don’t take action. When you find something isn’t working, you need to change it. When you find something is working, give it more attention. Business plans are there to provide a roadmap, but you should always stay flexible to succeed. 

How Many Online Businesses Fail?

About 1,470,150 online business fail every year. It’s difficult to get the exact number. The US Chamber of Commerce reports 5.5 million new business registrations. Zippia says 29.7% of businesses do business online. And multiple sources say 90% of online businesses fail in their first 4 months, which brings the number to roughly 1,470,150. 

Which Online Business Has the Highest Rate of Failure?

Affiliate marketing has the highest rate of failure for online businesses at 95%. Most affiliate marketers fail because of high competition, bad niche selection, and producing low value content and websites. 

Because the barrier of entry for affiliate marketing is so low, so many people jump on this business. The cost to get started is low, and the potential profits are high. This is why every niche is packed with affiliate marketers. This is also why finding a good niche is now very difficult. Finally, too many people think that affiliate marketing is the same as it was 5 years ago. Back then, you could produce low quality content and still win keywords and make affiliate sales. Today, that is no longer the case.

How Long Do Online Businesses Last?

Online businesses last 3 - 5 years on average, with the best online businesses lasting 9 - 10 years. Of course, this depends on what type of business you’re running. Keep in mind that these numbers are for successful online businesses. The 10% that get past the first 4 months of operation. 

3 Online Business Failure Examples

Example #1: Davie Fogary's Ecommerce Business

Davie Fogarty Failure Story

Davie Fogary started Calming Blanket in 2018, and it became one of Australia’s fastest growing ecommerce stores. Calming Blanket sold weighted blankets, something that wasn’t common yet. He gained $1,000 in pre-orders on his first month, which instantly showed that he struck gold. In his first year, Davie Fogary made 1.5 million AUD in profits. The following year, this went up to 2.5 million.

However, Calming Blanket eventually ran into fresh problems. Big retailers began selling their own weighted blankets for much lower prices. Davie overstocked his inventory, leading to plenty of wasted expenses. Apple changed their privacy policy, making paid ads on Facebook more difficult. Fogary also expanded his team too quickly, which led to high expenses and inefficient output. 

Davie Fogary encourages new online businesses to strengthen good business processes. He says avoid shiny objects, and stay focused on core business strengths. 

Example #2: Daniel Midson-Short's Tech Startup

Daniel Midson-Short shared the story of his failed tech startup on YouTube. He and a few partners set out to create a healthcare app from scratch. Daniel says he was dreaming of becoming a tech billionaire. He gave up his job and invested $60,000 - $70,000 of his own savings into the project. 

However, the project ran into many problems early on. Each member of the startup had different goals and work ethics, which slowed the project down. And after two and a half years, it was clear the app was going nowhere. 

Despite this, Daniel doesn’t regret his decisions. He encourages his viewers that going for a business idea is worth it, even if it fails. He also warns people to make sure they’re enjoying what they’re doing. He says that the allure of becoming a tech billionaire was the reason he did this gig, not that he enjoyed the job. 

Example #3: Aira's Etsy Store

Aira’s Etsy store got banned after she sold copyrighted merchandise. When she first started, she was very careful to avoid replicating big brands like Disney or Pokemon. However, as competition rose in Etsy, she began venturing into grey areas. Aira started selling merch with popular musicians like Taylor Swift. Universal Music sent a copyright notice to take down this merchandise. However, she failed to remove everything, leading to her ban from Etsy. 

After the ban, Aira lost all her income from Etsy. She also had to pay legal fees for copyright infringement. She is currently starting a new business outside of Etsy. However, this failure story is a clear warning to study the copyright and trademark laws. Many online business owners think they can get away from this, but it’s unwise to risk it. 

What Can You Do If Your Online Business Fails? 

If your online business fails, you can either cut your losses and move on or change your entire strategy. Whatever the case, it’s very important to first diagnose why you failed. This can be a very emotional time, but try to come up with logical answers. This way, you can better decide which course to take.

If you find that the business idea was not good from the get go, it makes sense to abandon it. It's difficult to let go, especially if you’ve invested lots of time and money into the project. But forcing the issue with a bad business idea will only drag you further down. Like Daniel Midson-Short’s failure story, use this as a learning opportunity. 

If you find that your execution was the problem, you can re-strategize and try again. Do a deep analysis and find everything that isn’t working. You may have to learn new skills or bring in new employees to help out. Like Davie Fogary’s story, strengthen your business processes and set realistic expectations.

Can Online Business Failure Be a Good Thing? 

Yes, online business failure can be a good thing because it’s a tremendous learning opportunity. Online business is not something you learn by reading books, blogs, or courses. Those can help, but the real learning happens when you start. Very few small business owners get it right the first time they try. Most people have to fail several times before they become successful entrepreneurs. That’s why you should never let the fear of failure hold you back from starting. 

Conclusion: How Risky is an Online Business? 

90% of online businesses fail. There are countless online business failure stories online. And so many people return to their corporate jobs in defeat. And yet, the rewards of starting a successful online business far outweigh the risks. Which is why millions of people still try despite the odds. However, there are ways that you can better your chances of success. One of these is to go for a low-risk business model like local lead generation. 

Local lead generation works by building and ranking websites and then renting them to local service businesses. The risks are low since there are little upfront fees and you can start this as a side hustle. Once your website is ranking, you can easily rent it to service businesses for $500 - $3,000/month. Finally, local lead generation has far less competition than other online business models. There are over 41,000 ZIP codes in America alone, and hundreds of service businesses to choose from! This model allows for scalability as you can expand your portfolio of rented websites across various industries and locations, increasing your passive income potential over time.

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Ippei Kanehara

$52K per month providing lead generation services to small businesses

Ippei.com is for digital hustlers, industry leaders and online business owners.

His #1 online business recommendation in 2024, is to build your own lead generation business.

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