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Case Study: Small Business: Success or Failure?

Author: Sophia
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what's covered
Did you know that two thirds of small businesses end up failing within their first 2 years? Why does this happen? You will address that in this case. Moreover, and perhaps more importantly, what is it that you can learn from these failures and successes that can help you when you run your own business? In this lesson, you will learn why a business is likely to fail or be successful. Specifically, this lesson will cover the following:

Table of Contents

1. Business Success

Business success generally stems from a blend of strategic planning, effective management, market awareness, innovation, and adaptability. While many small businesses experience failure, there are also a great number who experience incredible success.

Small business success can come from the following:

Success Detail
Management and leadership Business success tends to come from sound management of both finances and people. If you can’t keep good employees, they’re going to buy from your competition.
Planning and organizing This involves correctly analyzing the demand for your product—and not overestimating it—and planning correctly and realistically how to meet those demands. Overpromising can be a very big problem.
Hard work and effort Especially in a small business, these are the keys to success. It’s not easy to run a small business, as we’ve talked about before. The workload is simply tremendous. Therefore, keeping your eye on the ball and putting in the hours that are necessary for the business are vital. In addition, a little bit of luck certainly helps.

EXAMPLE

An excellent small business success is Oak Street Bootmakers, which is owned by George Vlagos. Vlagos realized that in Chicago, it was really difficult to find a pair of quality shoes. So, he opened his small business, Oak Street Bootmakers, and now there is a 6-week waitlist to get a pair! He was able to meet the demand for custom-made shoes.

Another small business success is Bamboletta Dolls, based in Vancouver. Bamboletta Dolls is about community and using all-natural materials to create handcrafted, one-of-a-kind dolls for children of all ages. The owner, Christina Platt, was able to meet the demand for all-natural dolls that felt real to children while also focusing on community.

Let’s follow the small business story of Amira and Mariam:


IN CONTEXT:
Mariam and Amira Start a Business

Mariam and Amira, then two college students, were living in the lively city of Silverstream, California. Mariam loved computer science, and Amira was studying business. They both noticed a big problem in their community: many small businesses were closing. It wasn’t because the owners didn’t care—it was because they didn’t know how to understand their business data.

EXAMPLE

A food truck might not know which item sells best, or a bookstore might not know how much it costs to keep certain books in stock.

Business owners were using messy spreadsheets, paper receipts, and spending hours tracking sales by hand. Amira worked part-time at a bakery and saw how bad recordkeeping led to buying too many ingredients. Mariam’s parents owned a clothing store and always worried about whether seasonal items were helping or hurting their profits. There was a lot of data, but no clear answers.

One day, while working on a school project about using data to make smart decisions, Amira had an idea. She suggested building a simple tool that could turn business data into easy-to-read charts. Mariam loved the idea. They decided to make a dashboard that would help small business owners see how they were doing, find ways to improve, and avoid common mistakes like spending too much or guessing wrong about what to order.

They built a basic version of the tool and named it AmmA, a mix of their names. Even people without a business background found it easy to use. It automatically pulled sales data and showed it in clear, colorful charts. They gave free trials to five local businesses. One café found out that its most popular item was actually losing money, so they took it off the menu and saved $400 a month. A bookstore used AmmA to order more of its best-selling books and fewer of the ones that didn’t sell.

2. Business Failure

Business failure is a complex and multifaceted problem impacting organizations across all sizes and industries. Companies may falter due to both internal vulnerabilities and external pressures and influences. Some of the big reasons that businesses fail are as follows:

Failure Detail
Mismanagement There is a management failure of some type: Management takes its eye off the ball and fails to do its job of creating wealth for the shareholders.
Financial miscalculation There’s simply not enough money to make it through the growth of the business. The business didn’t anticipate how much it would take, or it anticipated incorrectly.
Lack of focus from management or employees This happens a lot with small businesses. A small business owner simply may not have enough time to focus on the things that they need to focus on. You might say they’re “getting into the weeds” of the business.
Uncontrolled resources Things like groupthink (a psychological phenomenon that occurs within groups, in which the desire for harmony can lead to poor decision-making) or starting to believe your own press can lead to failure. There may not be adequate checks and balances on different departments within the organization, so there’s no control system for the decisions that are made. Any large-scale decision that is made, no matter who makes it, should involve an audit process within the business. If there’s no auditing process to ensure that the decisions are based on sound data, then one small mistake can have a very large impact on the business as a whole.

Business failures happen for a variety of reasons, as you’ve learned. Consider some of these business failures:

  • Spirit Airlines: The budget carrier filed for bankruptcy in November 2024 after suffering mounting losses and large amounts of debt in the post-pandemic travel landscape. They tried to merge with JetBlue Airways, but this failed and, therefore, the company is flailing. Time will tell if it is able to make large strategic changes to get the business back on track.
  • Northvolt: The Swedish battery manufacturer filed for Chapter 11 bankruptcy in the United States in November 2024 and subsequently filed for bankruptcy in Sweden in March 2025. The company was weighed down by $5.8 billion in debt amid production difficulties and inadequate funding.
Small businesses can also fail. Often, the reasons for this include inadequate research prior to starting the business and lack of funds to keep the business going. Here are some examples:
  • Foxtrot Market: This Chicago-based coffee and convenience chain, launched in 2015, shut down after merging with Dom’s Kitchen & Market to form Outfox Hospitality. Financial strain, ambitious expansion goals, and lavish spending led to its downfall. The brand has since been revived under a new parent company.
  • Sam Ash Music: Established in 1924, this family-owned musical instrument retailer filed for bankruptcy in May 2024 and closed all 42 of its locations. The company cited weakened sales due to a market shift toward online shopping during the COVID-19 pandemic.
How will Amira and Mariam continue on their successes? Or will they fail?


IN CONTEXT:
AmmA Begins or Ends?

Interest skyrocketed, and local entrepreneurs helped spread the word. However, success also brought new challenges. They had to figure out how to prioritize user feedback, fix bugs, and, most importantly, secure funding.


Amira “Mariam, have you seen the emails? Three more businesses signed up today!”
Mariam “That’s amazing! Word is really getting around. I didn’t expect it to grow this fast.”
Amira “Me neither. But now we’ve got a new problem—people are sending in feedback, and some of it points out bugs we didn’t catch.”
Mariam “Yeah, I noticed a few glitches in the dashboard charts. I’ll start fixing those tonight. But we also need a better way to track all this feedback.”
Amira “Agreed. And we need funding if we want to keep this going. We can’t keep running everything on our laptops forever.”

What are the challenges that Mariam and Amira need to solve? See if you can determine how they persevere in this video:

watch

term to know
Groupthink
A psychological phenomenon that occurs within groups, in which the desire for harmony can lead to poor decision-making.

summary
In this lesson, you learned about the factors that contribute to business success and business failure. Businesses often fail due to internal mismanagement, including poor planning, weak leadership skills, and financial struggles. If a company can’t handle its cash flow, keep good employees, or accurately forecast market demand, it’s more likely to fail. Like in the example of Amira and Mariam, small business owners who overestimate their customer base without securing enough start-up money may have trouble with ongoing expenses, which could lead to an early shutdown. Other examples of poor management include delegating tasks poorly and not having clear departmental accountability.

Real-life examples show how bad management can have disastrous consequences. After a series of financial missteps, including taking on too much debt and a failed merger with JetBlue, Spirit Airlines went bankrupt in 2024. The same thing happened to Foxtrot Market, a Chicago-based retail chain, which collapsed after merging with Dom’s Kitchen & Market. The main reasons for their downfall were overspending, unclear strategy, and overly ambitious expansion plans. These examples highlight how vital strong leadership and solid planning are for a business to succeed.

When you understand why businesses fail, you are more likely to recognize trends and use those insights to inform your future decisions. For any business, whether it’s a start-up or an established one, survival depends on staying focused on operations, anticipating financial needs, and adapting to market changes. By studying companies like Sam Ash Music, which fell behind on e-commerce trends, or Northvolt, which struggled with $5.8 billion in debt and production issues, you can see how a lack of flexibility and financial planning can be just as damaging as poor management decisions.

Source: THIS TUTORIAL WAS AUTHORED BY SOPHIA LEARNING. PLEASE SEE OUR TERMS OF USE

REFERENCES

Green, H. H. (2024, November 12). Foxtrot 2.0—The corner store chain’s return, explained. Eater Chicago. chicago.eater.com/2024/11/11/24288827/foxtrot-market-explained-reopening-fulton-market-opening-mike-lavitola-further-point-enterprises

Randles, J., & Schlangenstein, M. (2024, November 18). Spirit Airlines files for bankruptcy following failed JetBlue deal. Financial Post. financialpost.com/transportation/airlines/spirit-air-bankruptcy-jetblue

Northvolt. (2025, March 12). Northvolt files for bankruptcy in Sweden. northvolt.com/articles/northvolt-files-for-bankruptcy-in-sweden/

Reuters. (2024, May 9). Music retailer Sam Ash files for bankruptcy, will close all stores. www.reuters.com/markets/deals/music-retailer-sam-ash-files-bankruptcy-will-close-all-stores-2024-05-09/

Attributions
Terms to Know
Groupthink

A psychological phenomenon that occurs within groups, in which the desire for harmony can lead to poor decision-making.

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