The Small Business Administration reports that only 5% of Small Business start-ups last more than 5 years. If you are already past that benchmark Congratulations. Of those that get past the 5 year mark, approximately half of those will fail.
Which half will you be in?
Small business fails for a number of reasons. The first step in preventing your business from failing is to understand why they fail.
The principle reasons businesses fail are:
1. Your business is poorly located.
2. Your business goal is to only make a lot of money.
3. You poorly planned.
4. You lack truly relevant business and management expertise and don’t seek knowledge. Some call this Business Owner Ego.
5. You don’t have enough money to start your business.
7. You grew too fast or tried to.
8. No Internet presence.
How you ensure that any of these are not the cause of your business demise is critical to not only surviving your first year, but being successful and thriving after 10 or more years. So lets review those from above:
1. When considering the location for your business you should look at these points.
a. Does your town or city invite new businesses in where you want to be located
b. Can your customers find you
c. Is parking, lighting traffic all appropriate
2. You need to want more from your business than simply making a lot of money. Having your own business is less about making a lot of money, not having to answer to anyone and having tons of free time available for you. You also need the following;
a. Mental strength and thick skin to withstand the challenges and criticisms
b. You don’t mind failure. In fact, it inspires you
c. You want to be independent
d. You have a passion for what you will be producing or providing
3. Careful, detailed planning, combined with a lot of hard work, makes for a successful business. Having some kind of plan is critical. Some will tell you a formal business plan is a necessity. It is only if you are seeking funding from banks or other lenders. Overall what you need, which is much like a formal business plan, is;
a. An idea of what your business will be.
b. You need to know it’s mission, vision and goals.
b. Financing. Most often this is your money. Obtaining business loans for start ups is incredibly challenging often unrealistic.
c. Marketing, and advertising. Don’t let anyone tell you these are the same as they are not. Without both as a fixed cost in your business you will fail.
4. Most small business owners have never been trained in the other skills it takes to run a business. They haven’t developed sound leadership skills. All business owners must master the following;
e. Waste elimination
f. Customer service
5. Insufficient funding to operate your business is a very common mistake. You must determine how much money your business will need, for both starting and staying in business. Many businesses take a couple of years before they become profitable and you must plan for this as well.
6. Growing too fast is a major cause of business failure. That sounds counter intuitive but it is really a matter of cash management coupled with the ability to provide or produce the new requirement while keeping the customer happy. Some will say this is a good problem to have. Not so. This can ruin your business both financially and in reputation. Don’t think that great 6 or 7 figure contract will suddenly thrust you into serious success; it won’t. Plan your growth and stick with the plan. I am not suggesting to impede your growth but I am suggesting to limit it. As a general rule 20% a year is a good target.
7. Some people would tell you that an Internet presence is not important. The volume of people using the Internet today is staggering. Over 80% of the US population uses the Internet.
8. You don’t need a robust Internet presence either. A simple 1 page website saying what you do, where you are and how to contact you is perfect for a new business. You can add to it as you grow. Many of these can be done without professional help and do exactly what you need them to do; establish your legitimacy by having an Internet presence. When beginning your business, and that is based upon gross sales and not how long you have been around, this is all you need. Don’t fall for fancy Search Engine Optimization or Internet Marketing packages (those come later), exotic interactive video filled websites that impress but don’t return on your investment. Start simple and build.
When starting, renewing, turning around or growing any business you, the owner of that business, are responsible. It isn’t the economy, the weather, the competition or zombie apocalypse; it is you and only you. Making certain you have everything you need to make your business a success is paramount. Free programs abound. Technical school programs abound. Consultants and Business advisors abound. Find what works for you and do it. All you have to save by doing that is your business.