Here you are, you finally did it! You took the plunge and opened your own business, after dreaming about it for what seems like forever. Now, I hate to be the bearer of bad news, but statistics show that one out of five new businesses do not survive their first year, and only two-thirds make it through their second. This number decreases to only 30 percent by the 10th year.
Ouch! That sounds depressing. Truth is that many people fail to even get to the point where you are, simply because of those disheartening statistics. Still, to think that there is no difference between those that fail and those that succeed would be a grave mistake. Let’s empower ourselves with information on what not to do. Here are the top reasons businesses fail today:
1. Not having a vision – Many people think that loving something or being passionate about something is enough of a reason to open a business. But opening it is not the end game, its just the starting point. You have to understand the broader picture, including the role your business can have in the community and where you would ultimately like to see it be in 5, 10, or 20 years. Without an end vision, you shouldn’t begin.
2. Not having a plan – So even if you have a vision, that’s still not enough. You need a specific plan of attack. A business plan provides the opportunity to articulate your vision clearly, then includes many vital elements or milestones that can be tracked and measured along the way. Your vision tells you what your goal is, but your business plan tells you how, specifically, you are going to get there.
3. Failure to focus on profitability – Profitability should actually be central to your business plan. Even the best idea in the world needs to be profitable. Smart TVs are ubiquitous now, but before this, WebTV offered the same service. Why did one fail while the other went on to monumental success? Simple: WebTV used a poor business plan that was ultimately unprofitable.
Once you do achieve profitability, continue to monitor it, small changes in costs can have huge impacts on your bottom line. As the owner, you need to understand what happens when the numbers change.
4. Poor record keeping – Detailed and accurate record keeping allows you to track trends and understand patterns, which ultimately help inform your decision-making process. As the saying goes, “you don’t know where you’re going, unless you know where you’ve been.” If record keeping is not your strength then outsource it – promptly!
5. Hiring the wrong people – Making the right hiring choices can be a real struggle, especially for a new company. You may not have a large budget to work with and you may not have any experience in knowing what type of person works best in your environment. This is why hiring decisions should be made slowly and thoughtfully. Thoroughly vet all potentials, and utilise a probationary period where possible. This gives you some latitude in adjusting your team composition if you find that a new member is not a good fit.
6. Not understanding your customer– Many new businesses make the mistake of assuming they know their customer– this is deadly. If for example, your ideal customer is most likely to visit your business on the weekend, and you’re only open weekdays, you can’t offer them what they need when they need it. Not only are you missing an opportunity to create loyal customers, you are also helping your competition succeed.
First off, make it a priority to define your target market, then research them carefully to learn what they value. And once you have a good customer base don’t just assume that they will be around forever. Seek constant feedback (both in person and online), learn from the insights provided, and make changes to your business as required.
7. Not networking face to face – It’s so important to get face-to-face with existing and potential clients, but this type of interaction is becoming less and less common as more people opt for digital communication methods. Too many business owners today default to sending emails as their primary method of communication — and occasionally making a phone call…it’s not enough. We might live in a digital age, but we are still real people and in-person communication is still the most effective way to create trust and grow loyal customers.
8. Not having a strong and positive online presence – While networking in-person is great, in order to reach the largest number of potential customers you must also ensure they can access you digitally.
Fact is that today most of your customers are online. When they look you up, how do you show up? Are you even there? If not, you are missing an enormous opportunity and putting yourself at risk of having your competitors manage your reputation for you.
9. Underestimating the competition – In order to truly understand your place in any market, it’s important that you also understand the competitors, and take any threat seriously.
MySpace used to be the biggest social media platform in existence, and they passed up a chance to buy Facebook for $75 million. Now Facebook is worth over $500 billion. Does MySpace even exist anymore? If they do, I’m sure they wish they could go back in time and take their competition more seriously.
10. Not standing out – In line with underestimating the competition, it’s also imperative that you don’t look too much like them either. You need to differentiate. You need to give people a reason to choose you over all the other opportunities available out there.
A good example here is with the grocery chain WholeFoods. Within a rather bland industry, WholeFoods managed to create a point of difference. They branded themselves as a ‘green’ market, ensured each store had a local focus, partnered with cooking shows to promote their foods, hosted events, maintained blogs, and even created their own app to connect with their customers. In short, they made themselves visible, showed how they were unique, and stood out from the competition.
11. Not adapting to change – We are at a point in time where change is happening at an unprecedented rate. Technology and globalization are making an impact in every market. It is vital to keep up!
Who would have guessed the impact that a smartphone would have on daily life, had they been asked twenty or thirty years ago? Next to no one could have predicted it, yet as smartphones became more ubiquitous, smart companies leveraged this by offering apps early on. Many times, those same companies became industry leaders.
12. Thinking YOU are the right person – Now, I’m not saying that you inherently can’t lead your company to profitability, nor are you born into failure. And I’m certainly not saying that Steve Jobs is the only person who could have taken Apple to the heights that it reached. But, he was not the right person. Instead, he knew the right people, he networked with the right investors, and he hired the right people. Jobs recognized the value in bringing all of these elements together to create something special, and that helped boost Apple to become the most valuable company in the world.
There is no magic formula to turn failure into success, but you can swing the odds in your favour by learning from others and not repeating their mistakes. Now you are aware of these top pitfalls, make it part of your game-plan to strategically avoid them.
And do keep in mind that any new endeavour involves some level of risk, at least you have thrown your cap in the ring and made a start. As Mark Zuckerberg says: “In a world that’s changing really quickly, the greatest risk is not taking any risk at all.”