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5 Reasons Why Businesses Fail (Infographic) Twenty percent of small businesses fail within their first year.

By Rose Leadem

Opinions expressed by Entrepreneur contributors are their own.

laflor | Getty Images

Entrepreneurship is no walk in the park. In fact, the amount of new businesses that fail exceed the number that succeed. That's why it's more important than ever to create a unique product or service that helps you stand out from the rest.

Related: Why 'Fail Fast, Fail Often' Is All Hype

However, don't be discouraged. If you believe in your business, passion will prevail. On average, 75 percent of small-business owners are confident in their company. And why shouldn't they be? They've turned their passion into profit. Yet, keep in mind it's important not to be overly confident. Instead, take things one step at a time. Typically, 20 percent of small businesses fail in their first year, 50 percent in their fifth year and 70 percent after a decade of being in business.

A number of factors play into a business's closing, such as location, the current market, cash flow and more. The number of reason most small businesses fail is due to cash flow, and California cities such as Stockton, Modesto, San Bernardino and Santa Rosa are some the worst places to launch a business because they can be expensive, the market's not there or they are too isolated.

Related: 3 Crucial Questions to 'Fail Proof' Your New Business Idea

So in order to ensure your business is on a path to success, it's crucial to invest in the right idea, test your product or service first, interact with prospective customers and build a solid team.

For more information on small-business failures, check out Insurance Quotes' infographic below.

Rose Leadem is a freelance writer for Entrepreneur.com. 

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