In an excellent NYT article from January 2011 Jay Goltz lays out his top 10 reasons for small business failure.

The short list (for the even shorter list just follow through the underlined phrases...):

Business is mathematically challenged - i.e. insufficient demand, too much competition.

Owners do not step down when time comes.

Sometimes less is more.

Poor accounting.

Cash flow (btw #1 reason businesses fail overall...).

Operational mediocrity.

Operational inefficiency.

Dysfunctional management.

Lack of succession plan.

Declining market.

For a deeper analysis, head over to Goltz's excellent article + bonus insightful comments from his readers.