Fifty percent. Fifty percent of small businesses fail within the first five years. Another Fifty percent of those that survive the first five years will fail in the second 5 years. Right out of the gate, small business owners are faced with not only these grim statistics but the often difficult road of finding capital to cover their startup costs.
So what do you do? You put all your efforts into growing your customer base, failing to consider (and implement) the important business development tasks needed to keep your business going in the long run.
With all the moving parts involved in running a business, your greatest asset as a business owner is having an infrastructure that is not only stable but sustainable.
Avoiding these 4 common pitfalls will help your small business prevail in any economy and keep it from becoming just another statistic:
- Poor Financial Planning
- Lack of Processes and Systems
- An Unclear Sales and Marketing Strategy
- Indecisive Leadership
Let’s take a deep dive into the common mistakes small business owners make at the start and the steps that can be taken to keep it thriving for years to come.
#1 Reason Small Businesses Fail: Poor Financial Planning
Creating a financial plan that is well thought out is fundamental in achieving success and yet, poor financial planning is often the main cause of so many small businesses fail not long after they get off the ground.
Finding the capital to start and operate can be difficult, but once you have it, the work doesn’t stop.
ACTION ITEM>> Create a realistic and viable financial plan that not only accounts for your operational and overhead costs but provides a clear view of money coming in and out of your business is a game-changer.
Knowing exactly what your finances look like, allows you to set a realistic budget for expenses and growth, and to better understand where your business should focus its efforts for increasing its profit margin.
#2 Reason Small Businesses Fail: Lack of Processes and Systems
Not having processes and systems in place for your business, is like driving a car without a steering wheel. You need to know where you’re going and how you’re going to get there.
All too often, new business owners rush into growing before establishing their goals and setting their foundations for long-term success. With no processes or operating procedures for handling your growing customer base and training your employees, it is easy for information to get lost in the shuffle and services to break down.
ACTION ITEM>> Establish processes and systems, like Standard Operating Procedures (SOPs) and automated workflows that can support your growth from the start. This allows for better communication, streamlined training, and more time to focus on how well you are meeting goals.
#3 Reason Small Businesses Fail: Indecisive Leadership
Nothing hurts a business more than a leader who is unsure of what they want and where they want to go. Small business owners often wear many hats and shoulder an enormous amount of responsibility. This can create a sense of urgency to grow quickly in order to lighten the load.
The entrepreneurial spirit can also cause owner’s to try and move in multiple directions at once. Without direction, a small business can quickly lose traction this way and have difficulty finding its way back to the path of success.
ACTION ITEM>> Take the time to create a plan when you are first starting out and reevaluate it as you grow. This will ensure that the strategies you’ve developed are still relevant and a good fit for what you are hoping to achieve. Having clear actionable goals and understanding the steps that need to be taken to make it happen will eliminate confusion and keep everything on track.
As a leader, the drive to consistently hold yourself and your team accountable in the way you define your values and deliver a superior experience to your customers will help keep your business sustainable.
#4 Reason Small Businesses Fail: Having an Unclear Sales and Marketing Strategy
In the excitement of starting up, business owners forget about the importance of having clear messaging for their target audience to increase sales and their profit margin.
Without understanding your value proposition in the marketplace, you’ll find yourself hitting a wall and fast. Your customers can’t buy if they don’t know what you’re selling.
ACTION ITEM>> Build sales and marketing strategies that breed results based on actual market research. Knowing that your business sources its highest conversions from leads gained in paid ads on social media, email marketing, community events, etc. tells you where to spend your hard-earned dollars to see the biggest return on investment.
The Key to Building a Healthy and Stable Business
The bottom line to why small businesses fail lies in business owners standing in their own way.
We jump into the world of business eager to start selling our products and services and forget about planning for and building the solid foundation needed for longevity.
Taking the time to build a business plan that focuses on financial planning, establishes processes and systems, implements sales and marketing strategies, and provides clear leadership is key in avoiding the proverbial chopping block.
Ready to Make Your New Business Successful?
If you are a startup and are ready to build your business in a stable environment, the Startup Accelerator program is for you! Over the course of 3 months, you will be guided through each phase of the startup process and when you’re done, you will have a strong foundation from which to grow and operate your new business.