Now more than ever, small business owners need to more vigilant with their management skills and operations. According to experts, as many as 20 percent of small businesses don’t make it past their first year. Even worse, 30 percent of the companies that do make it through their first year won’t make it past the second year.
As a small business owner, you need to educate yourself on what are the common reasons businesses shut down and how you can avoid making big mistakes. Understanding these things will not only ensure your business survives its first years but that it also manages to thrive.
Common Reasons for Business Failures
Building a business isn’t easy, and there are a lot of factors beyond your control that could negatively impact your business. But you should focus on the aspects that can influence your business and are within your control. Some of the more egregious reasons a company fails include the following:
- The business fails to connect meaningfully with the target audience for its products or services.
- The business doesn’t take enough advantage of technological advances in its field, causing it to fall behind competitors.
- Management lets a small problem slip pass, leading it to escalate and snowball into a crippling issue.
- The employees and managers don’t have any clue about the long-term goals of their business, causing confusion.
- The business takes on more responsibilities and commitments than it has resources and employees to handle, causing it to implode.
Protecting Your Business from Mistakes
Small businesses don’t have the resources and the constitution to survive big mistakes like those listed above, and even just one of those can affect the long-term viability of a company. When you want to protect your small business from making a huge mistake, follow these tips.
1. Set Clear Business Goals
The success of a small business depends on a precise goal setting. Without clear and concise business goals, your strategies will be rudderless, and your employees won’t know what to do. The key to creating effective business goals is to make sure they are SMART:
- Specific: Ensure your goals are unambiguous and clear.
- Measurable: You need to be able to measure the outcomes of your goals objectively.
- Attainable: Goals must be realistic and achievable by your means.
- Relevant: Your business goals need to be related to your business and connected to current issues of your company.
- Time-Based: Your goals must be linked with a specified time frame.
Once you have SMART goals, you’ll have an easier time creating strategies and instructing employees.
2. Take Preventative Measures
A smart small business owner never lets a problem escalate until it’s a crisis. Problems are like seeds; if you leave them long enough, they’ll grow, and you’ll get an excellent crop of failure. If you encounter a small problem, you should solve it now before it has a chance to snowball.
For example, is a beekeeper finds a small colony of destructor mites among their hives, they don’t let it fester until the pests have destroyed their business. They break out the Varroa mite treatment and purge the problem there and then. Always employ this type of mentality, and you can spare your company dealing with major issues.
3. Adopt New Technology
Technology exists to support human endeavours. You should always be on the lookout for any form of technology that can enhance your business management or streamline your operations. Unfortunately, not all business owners see it this way, and 42 percent of small businesses don’t take full advantage of available technology.
For example, restaurants may seem like they don’t need that much digitisation or technology, but you can’t be more wrong. Restaurants can adopt technology such as computerised ordering systems, electronic shift management, and online reservation software to streamline their operations. Keep an eye on such technology so that you don’t get overtaken by competitors.
4. Avoid Overexpansion
Never bite off more than your business can chew. When your small business seems so successful, you might be tempted to open a second location or increase your capacity. But before you commit to such an expansion of your operations, you must extensively analyse your resources and the potential market size. Without a proper foundation, your new growth can end up overextending your business’s resources and overtaking your employees. Always do extensive preparation before committing to expansion to avoid creating a massive drain on your business.
5. Understand Your Market
You may have a technical understanding of your industry and its details, but you may not be as familiar with your audience. Knowing what your market is like and what they do or think is essential in finding out how to reach out to them meaningfully. Market research is vital if you want to create marketing strategies that have long-lasting effects on the profitability of your business. Without understanding, your business will just be pouring your marketing budget down the drain and costing you the opportunity of getting new customers.
When it comes to protecting your small business, an ounce of prevention is worth a pound of cure. By following the tips listed above, you can ensure your business can make it through the first shaky years.