The saddest thing in the world to me is to drive down a main street in a small town and see “going out of business” or “for rent” signs in the windows of retail spaces. The last few years in business have been tough, but many of the business failures out there are largely preventable. The thing I know about business, is that you must figure out what you don’t know about business to survive. Here are the 8 most common reasons why small businesses fail.
1) No clue about how hard it is to run a business– People start small businesses for many reasons. They hate their job, need some side money or always wanted to open a shoe store or cupcake shop. The trouble is that too many people do not take the time to really think about what their life would be like as an entrepreneur. It’s a tough lifestyle, at first. Think about what you want out of life first, and then build a business that supports your personal and professional goals. Develop a life plan because you do not want to start a business that is NOT a good business for you.
2) No network– “Your network is your net worth.” You must spend time cultivating the market to develop and nurture your professional and personal connections. Your first customers will come from your personal network. If you have no network, your business will not be able to survive.
3) Not saving enough money- If you don’t save enough money before you start your business, you may not be able to hang in there until the business can generate any real revenue. People with assets have options. It takes on average 12-18 months to break even in a new business, let alone replace your corporate salary.
4) Lack of a niche focus– Too many small business owners sell to anyone they think has money. Take the time to develop a well-defined niche for your business. It is so much easier to develop a marketing plan when you are clear on your target. By the way, specialists can always charge more money.
5) No marketing plan- Too many small business live off referrals, which is good, but that eventually will dry up. You must put some effort each day into generating sales for your small business. You can make a call, send an email, write a blog post, and ask for a testimonial on LinkedIn from a happy new client. Do not rest on your reputation. Actively let the world know you are open for business.
6) Not managing your brand online– It’s now easier than ever to build a brand online. It’s also just as easy to damage your business brand. Do you have a good, helpful website? Do you Google yourself and your business monthly? Do your social media accounts tell people how to hire you? Do you have a blog that hasn’t been updated in six months to a year? Do you have bad reviews online that you have not responded to? Can your website be seen easily from a mobile device? People will search for your company online before they ever call you, what would they find about your business today?
7) Not communicating with existing customers- It’s cheaper to keep a customer than to go out and get a new one. You must have a database, CRM system and email marketing program to communicate with your customers so that they know all the ways they can work with you. At least monthly, your customers should hear from you.
8) Lack of fiscal discipline– If you do not run your household with a budget, you won’t run your business with one. You must make business decisions based on up-to-date financial information. Know your latest numbers by the 15th of every month. Ask yourself “Why” three times before making a purchasing decision for your business.
Do you have any other reasons why small businesses fail?
“Failed Stamp Showing Reject” image courtesy of Stuart Miles / www.FreeDigitalPhotos.net
All very true. Another reason is lack of discipline. Some small business owners think that because they own the business, they can get there anytime they want. Which is so wrong. If it was paid employment ,would you get to work anytime you want?
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Very actionable steps here! I recently set up Freshbooks and it’s a life saver. Xero is another great option, but was harder for me to complete.
Freshbooks has easy reports to show you exactly where money is going and you can even bill up to three clients for free. It’s a great option for smaller or solo business owners just getting started.
Great insights into why businesses fail! I would add to your list, failing to invest in resources when needed. No one expects you to be capable of doing everything. Know when to hire qualifed professionals to assist you with that great marketing plan, financials, or other skills to help your business grow.
Another reason businesses fail is lack of organization – no procedures or systems in place to operate the business efficiently and effectively.
Another reason businesses fail is the greed mentality. Many open businesses thinking they will ‘hammer or hit’ the millions sooner. They do not realize that it takes your BLOOD to make the millions. In short, been in business is HARDWORK!
i agree!
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