According to the Small Business Administration, anywhere between 400,000 and 600,000 small businesses close their doors each year. While retirement and acquisitions account for some of these closings, the majority of exiting companies go out of business for largely preventable reasons.
Timing is everything. And so is good advice.
Even the greatest ideas in the world won't be profitable if the customers aren't ready for them (listen to this TED Talk by Bill Gross for more information on the topic). And, even if the timing is superb, there's also a chance that you're not the only one with that great idea. Starting and running a business is a huge financial and time commitment, and you owe it to yourself to research every angle. Don't discount the naysayers; if people you respect in business and in life are telling you it's not a good idea or the right time, you owe it to yourself (and said money and time) to be open to the fact they just may be right.
The trick to helping your local business survive is not only knowing when to jump into the water, but also how to make a splash and swim better than anyone else. If you are confident you can do that, keep reading to make sure your business can also go the distance.
Tight cash flow can strangle growth before it starts.
Unfortunately, it takes more than passion and work ethic to make a successful small business in Siouxland, despite residents here having plenty of both. One of the largest reasons small businesses fail is because entrepreneurs don't have proper budgeting, forecasting, and reporting practices. Taking the time to plan, review, and allocate resources goes a long way toward business growth, whether it's slow and steady or fast and furious.
In the beginning, business can be unpredictable, and planning for the unexpected--good and bad--can be next to impossible. The key is to know when to be conservative, when to take risks, and when to recalibrate goals and forecasts. If you are financially savvy, this will come as second nature to you. If you aren't, then it's always a good time to ask for help or to hire a part-time CFO.
Here are a few questions to get you going.
- Are you getting the information you need from your financial reports?
- Do you feel like you have the cash flow in your business to grow as you need to?
- Are there areas you feel are a drain on your income?
- Where do you see your business in 3 years? 5 years?
- Do you know where your money is going?
- Are you sending timely invoices?
- How often do you rely on credit to pay your expenses?
Competition can open windows or close doors.
A little competition in your industry can be healthy; it can inspire innovation, creativity, and brand loyalty. It can also drive you out of business if you aren't prepared to fight for your customers. According to research by the Peppers & Rogers Group, the main reason customers leave a business isn't price, it's poor service. This doesn't mean you have to embrace "the customer is always right" mentality; it does mean, however, that understanding, educating, rewarding, and empowering your customers goes a long way toward brand satisfaction and, ultimately, company success.
Some things to consider:
- Do you know who your direct competitors are?
- How is your company and your product / service different from your competition?
- How many customers did you lose to competitive brands in the last year?
- How many did you lure away from those competitors?
- What are you currently doing to maintain and encourage customer loyalty?
- How adept is your staff at delivering the type of service you and your customers expect?
Keep marketing fresh and available.
Failing to stay in front of customers is another reason entrepreneurs fail, particularly in Siouxland. A stale marketing message, a regurgitated direct mail campaign, and dated stock photography can prevent new customers from engaging, and does nothing to prevent current customers from being distracted by shinier competition.
A few questions to consider:
- When was the last time you evaluated your marketing campaign?
- Do you know where your customers are coming from? How are they hearing about you?
- How relevent is your social media presence?
- How engaged are you with your customers on review platforms? When was the last time you updated your website or mailings? Are you optimized for mobile content?
Watch how you burn your candle.
Maintaining a work-life balance is especially important for small business owners, who tend to push the limits of the clock and their health as they cram as much as possible into each and every day. Often the initial success of a business is fueled more by owner excitement than by capital, but many a business owner realizes how fast a candle can melt when it's burning at both ends. The trick to sustaining the flame lit is to hire the right team, delegate the right projects, and maintain the proper focus. Be realistic about your business parameters, and ask yourself the following questions
- How long do your projects actually take? How does this compare with the time you are budgeting?
- What is a comfortable workload for you?
- How many hours do you focus on the business each day?
- How much time do you take for you (not including sleep)
- How much sleep are you getting?
- Is it time to grow your team or narrow your product / service offerings?
Maintain a wide platform.
Another recipe for disaster is an over-reliance on only one or two large customer accounts. Having a few "whales" is always nice, but don't be afraid to continually lure and attract the smaller fish to your boat. Better to have several smaller clients that ebb and flow than to have one or two large clients who could capsize you if they leave. Another benefit to smaller clients? When they grow, so can you.
About half of all new businesses survive five years or more, and about one-third survive 10 years or more. All the more reason to start strong, be agile, and keep your momentum going. The best way to do that is to bolster your soft spots with a good team and cash flow breathing room. You can find advice on both right here.