In 2017 only about 20 percent of small businesses survived past their first year. Somewhat surprisingly, the figure was almost identical for businesses in 1997. What this reveals is that small business success has little to do with the state of the overall economy. It’s much more about the decisions and actions those small businesses take.
The high rates of failure show us that it’s not bold and brash decisions that cause promising businesses to shutter. Rather, the kinds of mistakes and missteps that sink a small business are common, almost universal.
But hidden in this dour realization is an opportunity for wise business leaders. If you learn from the mistakes of others, you can avoid these pitfalls and maintain a healthy, prosperous business.
1. Trying to Run a One-Person Business
Small business owners have to wear a lot of hats but they can’t be a jack-of-all-trades. There are limits to everyone’s experience and expertise, along with their time and energy. When a small business owner tries to take on too much individually or put too much on a small staff the outcome is obvious. Burnout sets in quickly. And that’s not an easy thing to recover from as new work continues to pile up.
2. Relying on the Wrong Staff
A bad hire disrupts operations and bleeds money off the bottom line. Since small business owners often rely on friends and family for help, staff are not always qualified personally or professionally. That leads them to underperform but means replacing them is especially difficult. Inadequate or insufficient staff makes it hard to grow or even hold place.
3. Failing to Prepare and Protect
The unexpected is inevitable. When an accident or incident happens suddenly the consequences can be absolute. A business insurance comparison is intended to help small businesses get all the overage they need. Unfortunately, tight budgets lead some decision-makers to write it off as an unnecessary expense. Then, when it matters most, essential protection is missing and the business is held accountable for the costs. Yikes!
4. Ignoring the Customer
The customer is always right, but that is a hard lesson for new business owners to learn. When things are not working out it’s easy to conclude that the customer is the problem and not the business. As a result, complaints get ignored, bad products/services persist, and longtime customers run to the competition. Success in small business is about preparation and adaptation.
5. Losing Sight of Cash Flow
Profits are great, but cash flow is the real lifeblood of a business. When small business owners do not manage cash flow carefully it leads to operational interruptions and disgruntled customers. It also creates payroll problems and makes strategic decision-making uncertain. The longer this issue goes on the harder it is to overcome.
6. Operating Without a Plan
In the early days of a small business, it’s understandable to improvise and experiment. Quickly, however, a business must have a clear and detailed plan to follow. Otherwise, decision-making suffers, funds are used incorrectly, disorganization spreads, and the business becomes its own enemy. If a business is going to make it long term it needs the vision and guidance to get there.
This is not a recipe for success. Think of it more as a road map that points out where all the land mines are. It’s still up to intrepid entrepreneurs to move the business forward. But now it’s possible to focus on sustaining success rather than setbacks and stumbles. Best of luck!