The failure rate of small business is alazmingly high in Pakistan. Researchers and policy makers are searching the ways and means to minimize it. The aim of this study is to examine the factors causing the failure of SMEs by collecting primary data from 119 respondents working in SME sector in Azad Jammu and Kashmir (AJ&K) Pakistan through a questionnaire. Both descriptive and inferential statistics were employed to present the empirical data. Despite its pazamount significance, there are few studies on this issue in Pakistan. This study attempts to fill this gap. Most of the studies on critical failure factors (CFFs) have discussed all CFFs jointly. However, in this study, CFFs are divided in two categories internal and external CFFs and their impact on SMEs failure were checked. The study also proposed solutions to overcome these failure factors.
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