Although survival rates for small business enterprises have significantly improved over the years, there is still a 50/50 chance for failure in the first five years.
There are some common mistakes made by small business owners that if avoided, or rectified early on, can dramatically raise the chance for survival.
1. Inadequate Market Research – A great idea, product or service falls flat if there is no demand for it in the marketplace. Repeatedly segmenting and targeting the market is essential to developing a marketing and sales strategy. You don’t want to end up trying to sell ice cubes to Eskimos.
2. Inadequate Planning – This is probably the most significant mistake in why small businesses fail. Planning begins with a business plan. If there is no business plan – STOP! Seek whatever help you need and get one written. Then – FOLLOW IT! A business plan is the vehicle from which a business is run and prospers.
3. Inadequate Capital or Self-Financed – Money is the be all and end all of small business survival. This is where the business plan’s comprehensive budget and realistic forecasting comes into play. It’s simple math… 0 money for the business = 0 business.
There is a saying, “A lawyer who defends himself has a fool for a client.” This translates as well to
owners who finance their own small business. Self-financing can prove disastrous for owner and business alike.
4. Inadequate Marketing Plan – A classic Dolly Parton-ism applies here, “If you don’t blow your own horn, how will they know you’re coming.” Marketing is the horn that brings a product to the marketplace. It involves advertising, public relations, communications, collateral materials and a website presence. Marketing is a “must-have” for business survival.
5. Inadequate Financial Management – There are so many potential problems, this area begs being handled by a full or part-time professional. Key tips include; stick to the budget like it’s etched in stone, build a financial safety net by investing profits back into the company for 5 yrs., budget a salary for the owner and set aside sufficient funds for tax obligations and contingencies.
6. Inadequate Understanding of Strengths and Weaknesses – A small business enterprise is a reflection of its owner. Building upon strengths and shoring up weaknesses with full or part time staff helps balance the needs of the business, resulting in higher levels of performance and productivity.
7. Inadequate Expertise – Otherwise known as the “I can do it all” syndrome. Further to understanding the needs of the company, budgeting for experts such as accountants, attorneys, marketers, web designers, etc. on an “as needed” basis is vitally important.
8. Inadequate Adaptability – Adaptability is a 21st Century survival skill for all business enterprises, large or small. Technology changes, trends shift, the economy fluctuates – survival depends on the ability of the entire company to be flexible enough to respond to volatility.
9. Fear of Failure – Entrepreneurship is not for the faint of heart. However, blessed are the risk takers for they shall reap the profits. Consider hiring a coach, establishing a board of advisors or invite adjunct mentors to provide additional support.
10. Rapid Growth – While it is anathema for a company to turn down revenue opportunities, rapid growth can sink a small business if it is not prepared to meet the demand. Under these circumstances, being the tortoise, by pacing sustainable growth wins the race.
Take a look at each of the mistakes and make sure that you don’t fall into these traps.