Fifty percent of all small businesses fail within the first four years. What a staggering fact! Will you be joining that statistic? Your success depends on several factors, including your willingness to learn from the mistakes of others. Most of these failures resemble each other in crucial ways. Once you identify the warning signs of failure, you can increase your own chance of success. Included in this article are possible ways for the small-business owner to avoid these avenues of potential failure.
1. Planning
Do not get caught up in the day-to-day aspects of the business. Often this does not allow sufficient time to plan ahead. This is an area where many small-business owners fail. They were not prepared. All aspects of a successful business require planning. You should be committed to your planning needs to take your business to the next level of success.
Solution:
Your start should be to set realistic and specific goals for your business and have deadlines for the goals to be accomplished. Do not say that you want to “increase sales,” rather decide you want sales to reach $100,000 by the next holiday season. Write down the steps to take to meet those goals. Use a timetable of deadlines for completing those steps. Consult your goal list every day to be sure that you are on track to meet your objectives. Review your completed goals against your game plan and remaining goals. When you have reached a goal, you might need to alter your existing goals to continue to the next level of success.
2. Procrastination
Small-business owners discover that tasks and paperwork can pile up to overwhelming heights. Do not put these tasks off until the piles overwhelm you.
Solution:
Maintain a specific schedule to deal with the paperwork aspect of your business. Do not let yourself be pulled away from the tasks to concentrate on more appealing aspects of your business you may consider outsourcing the paperwork aspect of the business. With the endless supply of college students looking for part-time work, you should easily find help. Alternatively, consider linking with an office business center that provides professional business services as needed. These options could free up time, allowing you to effectively manage and operate your business.
3. Competition
In today’s world, consumers go where they find the best products and services. Do not ignore the competition. Your customers may be going to the competition to find better products and services.
Solution:
Review what your competition is doing. Try some of their best ideas (without violating patent law). Devote time each week or month to develop new methods, products or services for your business. Do not try to keep up with the competition, move ahead of them!
4. Marketing
Do your products or services sell themselves? Probably not. If your customers have never heard of you, they cannot find you. Are you reaching the targeted customers who will have need or desire for your products or services? Have you kept your marketing current? Take the time to evaluate your marketing strategy.
Solution:
If you do not have time or the know-how to market your product or services effectively, hire a professional to do it for you. It should be well worth the money. Marketing can keep products and services selling and money flowing into your business. It is crucial to the success of your business that you do it well. Do not forget the often overlooked aspect of curb appeal for your business location. This quality also can be extended to the look of your employees/staff and business vehicles. The best marketing source is your current client base who refers you. Loyal, satisfied customers are more likely to recommend your company, providing word-of-mouth advertising—the most effective and least expensive form of sales promotion.
5. Customers
It costs about five times more to acquire a new customer than to retain an existing one, so you do not want to lose any. Proper service and meeting the needs of your customers are the keys to keeping them. Customer service should be a very important aspect of your business. Although this can sometimes be hard work, it is necessary, as your customers will find someone who will meet their needs if you don’t. High customer satisfaction saves money and increases sales and profits.
Solution:
Keep your customers happy by giving them what they want. Who knows what the customers really want? The customers do—but you will too, if you take steps to determine what they want. Use Customer Satisfaction Surveys or implement a “personal touch” follow-up with your customers. This can be accomplished with a phone call after the point of sale. Obtain feedback from your satisfied customers. Hosting a gathering in a relaxed atmosphere where the focus is “How can we better serve you?” Listen to what they say. Research your end user in their natural environment. Observe and listen. REALLY listen. Keep an open mind and analyze your findings. Develop a customer service plan that you put into place and consistently use in your business. Periodically, check your plan to keep up with your customers’ ever-changing needs and desires.
6. Employees
Your employees are your first point of contact with your clients. You want to achieve a good first impression. Go beyond the first impression stage and make sure the customer ends their point of contact with a good, lasting impression. Incompetent and disgruntled employees will not achieve a favorable impression.
Solution:
Be sure your employees are well trained with the skills to complete the tasks expected of them. Establish goals with them to avoid misunderstandings of expected growth. Create a work environment that keeps your staff happy and motivated. Motivated employees have a positive effect on the bottom line. As with customer satisfaction, keeping employees satisfied first starts by asking employees what they want or need, and REALLY listening to their answers. Establish a system that allows employees to provide their input regarding the business and its environment. You could establish open forum meetings where the employees participate or suggestion boxes. Make employees feel they are a vital part of the business by sharing business plans or marketing strategies with them, and encouraging them to give you their ideas. When employees participate in the management areas of the business, they take pride in its success, and that pride will show.
7. Versatility
Whether your talent is being “the best” at repairing vehicles or building homes, that’s not enough to make your business successful. To be a successful business owner, you need to be talented at a number of tasks, including accounting, marketing and hiring the right employees. You should be able to wear different hats at the drop of a hat.
Solution:
For the tasks where your experience is limited or nonexistent, consider taking educational courses at your local college or technical school. With the right initiative, you can teach yourself with books or software. Also consider joining industry associations, which can provide you with information through educational seminars and networking.
8. Location
The best restaurant or retail store will fail if it is in the wrong place. Consider factors such as traffic and convenience. How many potential customers pass your business during the course of an afternoon or evening? Are these potential customers from your target customer group? How difficult is it for your customers to get to your location on a regular basis?
Solution:
Using your target customers, evaluate them against your location. Determine if traffic flow and convenience fits with your target customer. Stay familiar with your surrounding area, recognizing when progress in the area is going to hinder or assist you with potential business. Have a free consultation with a real estate agent who could offer you assistance. Keep an open mind to the possibility of moving your business to a more advantageous location. Consider leasing space from an executive suite rather than leasing your own space.
9. Cash Flow
It is very important to track and understand the flow of your money coming in and out of your business. Even if your business is profitable, it will struggle if it runs short on cash. In addition, you must learn to make cash flow projections (budgets) to help you decide how much money you can afford to spend and warn you of potential trouble.
Solution:
Develop a simple bookkeeping system. This could be manual or through the use of computer software package such as QuickBooks. Set a schedule to maintain the bookkeeping, so you are consistently current with tracking money through the business. Go a step beyond and make a budget for your business. Consistently compare the budget to the actual figures to determine if management decisions need to be made from a financial aspect. Watch very carefully for cash flow trends where your income fluctuates. This should prepare you in advance for income fluctuations. Consider getting assistance from a professional, such as a C.P.A. firm, to review your records periodically. Professional firms offer assistance with planning or suggestions regarding cash flow.
10. Closed Mind
Are you surprised to find that many of your ideas regarding your business were wrong? It happens to everyone. We start business with a certain mindset about how things will work, when to implement certain procedures and why we think this will be successful. We often forget to keep an open mind regarding all aspects of our business. The procedures that worked three years ago will not necessarily work in today’s market. Be willing to consider new ways and ideas to keep your business current and successful.
Solution:
Use mentors who can give you advice and review your ideas before making important financial commitments. Subscribe to periodicals and magazines that give you the current information and news about your industry. Read books about small business, visit business-related websites and network with your peers by joining community business associations. These are some methods to keep you informed. With this information, do not be afraid to try new ideas or make changes. After all, that is how you started your business.
Bottom Line
In covering the top 10 reasons small-business owners fail, you have the knowledge you need to learn from the mistakes of others. Use the listed suggestions to avoid these factors for failure, and you will be strengthening your potential for success. Good luck in meeting the challenges of being a successful small-business owner! For more information regarding this topic, please contact Henssler Financial at 770-429-9166 or experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
