Research reveals that only one-third of small businesses make it past that tricky first decade, many failing within the first few years, as you can see in the image below. This high failure rate means it’s essential you make the right decisions to ensure the success of your small business as it grows, including planning to meet future resource needs. This article shares some down-to-earth tips to help your small business succeed across the main failure points.
Taking your small business to the next level is rewarding but also requires a lot of planning. It’s an exciting journey that helps ensure your business survives and thrives in the long run. Like a game of chess, the fatal mistake often occurs within the first three steps. Thus, you ensure the survival of your small business with the steps you take even before you launch your business.
Let’s start by discussing the key reasons small businesses fail, then jump into a discussion of how you can ensure the success of your business by addressing each of these sources of failure.
Why do small businesses fail
Below, you see a list of the top reasons why small businesses fail according to SCORE (the Service Corps of Retired Executives, a part of the US Small Business Administration).
Other sources point to other problems encountered by businesses, large and small, that lead to failure. These include:
- Poor planning
- Underestimate the commitment necessary for success in terms of time, money, and effort
- Failure to grow in a sustainable manner
- Not learning from your mistakes
- Late to pivot as conditions warrant a change in strategy
- Not enough attention to deriving insights from your key metrics
- Poor marketing choices
Let’s start with some of the biggest reasons for failure and some solutions to ensure the success of your venture by avoiding the problems before they overtake your chances of success.
No marketing need
I’m gonna fold this one into poor planning since a major aspect of a business plan involves building an understanding of your target market, estimating the size of the market, and the sales potential for your products (goods and services alike). Remember that consumers don’t buy products; they buy solutions to their problems, so you need to find an unmet need shared by enough people to sustain your business as it grows. Your target market must have not only the need for a solution but the money and authority to make a purchase. Thus, a market aimed at children should appeal to their parents who have the money to buy the product for them. Mcdonald’s does a great job of this with their Happy Meals offering parents a fast option that’s cheap enough to fit most parents’ budgets. The toys appeal to kids (in fact, the company spends a lot of money testing the toys for kid appeal before embarking on a launch) and the kid-friendly food that’s designed for smaller appetites also suits them. By making an effort to appear healthy by including optional apple slices and juice, the brand assuaged the guilt parents might feel about feeding hamburgers and fries to their little ones.
Think about consumer needs in a global market, not just among your friends. Not everyone is like your friends, and since founders are often young, educated, driven idealists, they need to think well beyond their friend group in a search for a market niche. For instance, I once saw an exhibit at the National Geographic Museum in DC about products designed for the “bottom of the pyramid” consumers. While they might not need even simple mobile phones, they need simple tools to help them eke out a living such as bikes that can transport a larger amount of produce to a market where they might receive a higher price for their goods than in the local village. Think stripped-down bikes that can balance milk crates stacked on platforms attached to the back as an affordable alternative for these consumers. Because they are a huge market, making a few pennies per unit nets vast revenue.
Cash flow problems
Note I didn’t say they didn’t have capital or revenue. The small business simply didn’t have the money needed to pay bills when those bills were due. This may result from poor collection efforts or not husbanding the business’s capital effectively.
You’ve probably heard several times that simplicity is the ultimate sophistication. Well, when it comes to your business, it can be the key to growing a successful enterprise. If you face problems matching revenue and expenses, it’s time for some spring cleaning in your business operations. Spot those areas where you can streamline things. Trim the unnecessary elements and focus on your strengths. It’s not only about saving bucks; it’s also about making your business light on its feet and ready to take off when the opportunity arises. Keep your business model clean and straightforward to be ready for future growth.
As your business blossoms, trying everything in-house is like a rollercoaster ride. That’s where outsourcing swoops in to save the day. Imagine passing the baton for accounting, IT support, or customer service tasks to seasoned pros or specialized agencies. It’s like having a full-fledged team at your beck and call, minus the hiring and training headaches. Plus, it liberates your precious time to focus on your forte – steering the ship. Perhaps you need a marketing boost but are not ready to assemble a whole marketing squad. In this situation, you can consider outsourced marketing and tap into some top-notch brains without emptying your wallet.
While you pay a premium per transaction when you outsource, the benefit of paying for only the portion of the time you require from trained personnel means you get talented staff without the cost. The alternative of hiring untrained staff or generalists to wear many hats usually results in failure.
The same goes for other capital outlays. For instance,
- rent equipment and lease facilities rather than buying them
- use contract manufacturing or licensing rather than investing in your own manufacturing facility
- sell online versus investing in a storefront or selling through a 3rd party, like Amazon, versus investing in your own website and marketing efforts
- ship through a third-party logistics firm rather than using your own trucks and warehouses
Failing to meet or exceed customer expectations
Customer happiness is the lifeblood of any business. Delighted clients keep returning for more, and they can’t help but sing your praises to anyone who will listen. So, invest some quality time in getting to know your customers. Understand their wants, likes, and pet peeves. Don’t hesitate to ask for feedback and put it to good use. Fine-tune your offerings and level up that customer experience. Cultivating strong customer relationships leads to increased repeat business and referrals; that’s like hitting the jackpot for business growth. Remember, a happy customer is your best companion as you gear up for expansion.
But, let’s talk concrete steps to ensure happy customers. Here are some things you should do every day:
- Respond quickly to customer queries, complaints, and atta-boys
- Own your mistakes and be transparent about how you will fix the problem
- Don’t over-promise. Customer satisfaction comes when you give customers what they expect (and delight comes when you deliver more). It might seem like a good marketing tool to promise the world so you stand out from the competition but it’ll bite you in the butt when you don’t deliver.
- Conduct a service audit and update it periodically
- Don’t expect your customer to act as your quality control. Microsoft made this mistake when they launched Windows 8 and the bad press swamped the company with complaints and cancelations. I switched to Apple to avoid the whole mess and never went back to Windows. If forced Microsoft to skip version 9 and go straight to Windows 10.
- Include your customers in decisions as a way to build a relationship and allow them “backstage” to cement their commitment
Not harnessing the power of big data
In today’s world, having the right data and properly leveraging that data to provide insights helps give your business an edge to ensure your success. Imagine you’re collecting in-depth information on your target market, their needs, your competitors’ strengths, and so on. It’s like having a crystal ball that lets you peek into trends and make educated guesses about your customers’ next moves. Take your analytics to the next level by building predictive models that help quantify your projections grounded by data. You can use this data to level up your game and scale your business with a dash of wisdom. So, no need for fancy suits; roll up your sleeves and acquaint yourself with some analytics tools.
Below are some of the metrics from your website to assess daily to help ensure your success.
Not having the right team
Having the right team is essential to ensure your success whether you run a small business or a large one. The wrong team:
- lacks the skills and/or experience necessary to perform necessary tasks
- doesn’t work well together
- won’t give you their complete effort
- poor communication
Of course, sometimes the problem isn’t having the wrong team members but the wrong management of your team. Some managers still see themselves as dictators rather than coaches, tyrants rather than cheerleaders. I’m a firm believer in Servant Leadership, where the leader is seen as someone who clears the way for his/her teams to succeed and smooths over hiccups between teams so they work together effectively.
Rather than some touchy-feely kumbayah Eastern philosophy, servant leadership is a tactic that gets the most from the talented folks you hire rather than standing in their way.
Not having the right equipment
Having the right equipment is fundamental for business success, as it ensures efficiency and productivity. Among various tools and technologies, a stable internet stands out as particularly crucial. It enables seamless communication, access to cloud-based services, and the ability to respond promptly to market changes. Reliable NBN plans support various business functions, from online transactions to virtual meetings, ensuring that operations run smoothly without disruptive downtimes.
But it’s more than just this that your business needs. You should be covering all of your bases when it comes to getting all of the equipment that you require to offer an excellent service. Don’t forget to include software in your plans also, as well as tools such as AI search to make your business as efficient as possible.
Applying the above tips will help ensure the success of your small business, allowing you to grow and thrive.
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