Starting a business is an exciting journey, but it comes with significant challenges. If you’re launching or running a Latino-owned business in Los Angeles, you might wonder: How many businesses fail, and why? Unfortunately, failure is common. Nationally, about 20% of small businesses close within the first year, and a staggering 96% don’t survive beyond 10 years. In Los Angeles, where the economy is competitive and diverse, Latino entrepreneurs face unique challenges, including access to funding, high operating costs, and shifting market demands.
So, why do businesses fail? Success depends on preparation, strategy, and adaptability. Let’s explore the top 10 reasons businesses struggle—and how you can avoid these pitfalls.
1. Lack of a Strategic Plan
A business without a plan is like driving without a map. You need a clear vision to communicate with your team and align your efforts. A solid business plan should outline your goals, target market, competition, and financial strategy. Many Latino entrepreneurs in LA start businesses based on passion but fail to create a roadmap for growth. Organizations like the Latino Business Alliance and the Los Angeles Small Business Development Center offer resources to help craft strategic plans.
2. Not Prioritizing the Customer
One of the biggest mistakes businesses make is focusing too much on their product instead of their customers. Understanding your audience is crucial—what do they need? What problems can you solve for them? In a city like LA, where 49% of the population is Latino, cultural awareness and personalized service can set your business apart. Tools like customer surveys and social media engagement can help fine-tune your approach.
3. Hiring the Wrong People
A business is only as strong as its team. Hiring employees who aren’t the right fit can impact everything from customer service to sales. Many small business owners in LA rely on family members, which can be a strength but also a challenge if roles aren’t clearly defined. Consider professional development programs and mentorship opportunities to strengthen your team.
4. Relying Too Much on the Owner
A common issue in Latino-owned businesses is that the owner handles everything. While dedication is admirable, growth requires delegation. Training employees, implementing automated systems, and outsourcing tasks like bookkeeping or social media can free up your time for strategic planning.
5. Lack of Innovation
Peter Drucker, a legendary business consultant, said, “Innovation and marketing are the only two essential functions of a business.” If your business isn’t evolving, it’s falling behind. In fast-paced industries like food, retail, and tech—where many Latino entrepreneurs in LA thrive—constant improvement is key. Whether introducing a new menu item or adopting e-commerce, staying ahead of trends keeps you competitive.
6. Failing to Adapt to Market Changes
LA’s economy is dynamic. Trends shift quickly, and businesses that don’t adapt struggle. Take, for example, the rise of food delivery apps. Many Latino-owned restaurants had to pivot during the pandemic by partnering with platforms like Uber Eats and DoorDash. Understanding industry shifts and being proactive rather than reactive can make the difference between growth and closure.
7. Poor Financial Management
Without strong financial oversight, even profitable businesses can collapse. Many small business owners struggle with budgeting, pricing, and tax planning. Free resources like SCORE Los Angeles and local business workshops can help you manage cash flow, secure loans, and make informed financial decisions.
8. Lack of Passion
Passion fuels perseverance. Business owners who love what they do push through obstacles and find creative solutions. However, passion alone isn’t enough—it must be paired with business acumen. If you feel burnt out, networking with fellow Latino entrepreneurs can provide inspiration and support.
9. Weak Marketing Strategies
Even the best products won’t sell without visibility. Marketing is crucial, especially in LA’s crowded marketplace. Businesses that fail to invest in social media, local SEO, and community engagement often struggle. Investing in bilingual marketing strategies can also be a game-changer in reaching the city’s diverse population.
10. Not Understanding Competitive Advantage
What makes your business unique? Your competitive advantage is what differentiates you from the competition. Many Latino-owned businesses in LA have built strong brands around cultural authenticity, quality service, and deep community ties. Identifying and leveraging your strengths—whether it’s a unique recipe, superior customer service, or niche expertise—can ensure long-term success.
Insights from an Entrepreneur: Why Businesses Fail
Mark Cuban, billionaire entrepreneur and investor, emphasizes preparation and adaptability as key to success. He says, “What I’ve learned over the years is that first, sales cure all. There has never been a company that has succeeded without sales. Second, you have to be willing to learn from failure, adjust, and move forward.” His advice applies directly to Latino-owned businesses—focus on revenue generation, be adaptable, and keep learning.
How to Beat the Odds and Succeed
The good news? Many Latino-owned businesses in LA are thriving by leveraging community networks, seeking mentorship, and staying adaptable. Here are a few key takeaways to increase your chances of success:
- Develop a clear business plan with goals, budgets, and marketing strategies.
- Stay connected with customers through social media and personalized service.
- Invest in the right team and delegate responsibilities.
- Innovate and stay ahead of trends to remain competitive.
- Master your finances to ensure long-term stability.
- Use local resources like the Los Angeles Latino Chamber of Commerce for support.
Starting and running a business isn’t easy, but with the right mindset and strategies, Latino entrepreneurs in Los Angeles can build sustainable, thriving businesses. Learn from the mistakes of others, embrace innovation, and never stop improving!
Latinos create 36% of new businesses but limitations mean that many do not prosper
