It’s not easy starting a business. Statistically, the odds are against you. A survey by Bloomberg has revealed that a shocking 80% of small companies fail within their first 18 months of existence.
Now that is not to say that you can’t be the next Sir Richard Branson, what we are saying to you as a budding entrepreneur, it is important to steer clear of the mistakes commonly made by those who have gone before you. It simply means learn from those who have failed and those who have succeeded in business and find the best possible path for your business to both survive and flourish.
Failure to plan strategically and financially
Poor strategic and financial planning is by far the most common cause of business failure, with incompetence accounting for 46% of failures within five years of starting up, according to a recent study. Making pricing and other financial decisions based on emotion, not planning sufficiently and being ignorant of financing are some key examples of incompetence.
The importance of devising a well-researched, sound business plan cannot be overstated. If you are completely clueless, it might benefit you to do some self-directed study or even enrol in business school, or at the very least to consult somebody who will be able to help you fine-tune your business strategy and financial plans.
Aversion to asking for payment
It can be easy to send out a pile of invoices and then congratulate yourself on a job well done. However, invoices should never be mistaken for cash in hand. Startup and small business owners soon learn that getting payment from clients is seldom as easy as it sounds.
Unfortunately, customers are not immune to failure and bankruptcy, particularly in the current financial climate. Avoid the temptation of assessing your business’s financial situation based on expected payment and put in place a system for reminding clients about unpaid invoices.
Not having a clearly defined scope
In the early days, it can be tempting to try to do anything anyone is willing to pay you for. However, in the long run, it is best not to try to be all things to all people. Diluting your brand and scope tends to result in your business being mediocre at a wide range of activities.
Trying to offer a far-reaching range of services, developing products with which you have no expertise or trying to reach too far beyond your established target markets for the sake of a slight boost in earnings can hurt your business in the long term and divert resources away from focusing on your strengths.
Trying to swim in unfamiliar waters without deliberate research and sufficient expertise can cause your team, your budget and your business in general to suffer from undue strain.
As your business grows, it is crucial that you are able to recruit and retain talented people. A talented and motivated team can make all the difference between your business and your competitors.
Always look for ways to improve your company culture, the benefits you pass on to your employees and the reasons your employees would want to continue working for you.
Employees need to get the sense that the leaders of the business care about them personally and professionally, and if a business is perceived as treating its employees simply as units programmed to carry out certain tasks, it will repeatedly fail to retain top talent.
Not having enough passion
Running a business is hard work. Don’t let anybody convince you otherwise. When you are passionate about what you do, your enthusiasm will infect the people you work with, whether at the office, production plant or facility, encouraging them to work harder, be more focused and ultimately enjoy more success at their jobs.
It is difficult to motivate employees if you yourself are unable to muster enthusiasm for your business activities. If you lack passion ask yourself seriously why are you in business?
Assuming customers will eventually appear
While focusing on producing quality products and services can in some situations help to increase your customer base, it is never safe to assume that this is a given. Many businesses make the mistake of regarding marketing as an unnecessary expense and try to cut it from the budget in challenging times.
The sad truth is that the market is inundated with excellent products and great ideas that have failed to gain success due to insufficient marketing. It is important to understand that the average consumer’s consciousness is already flooded with products and that in general products a consumer has either tried or been recommended have a far greater chance of being purchased.
It is therefore important to ensure that your marketing efforts are coordinated with each stage of product development, from innovation to release on the market. Even before your product hits the shelves, it should be very clear in your mind which marketing activities need to be carried out and when.
Forgetting that the customer always comes first
One unfortunate mistake many entrepreneurs make when they’ve hit upon a brilliant new business idea is to dive right into developing the product or service. This is a huge mistake if done without gathering sufficient information about the target market.
The customer must be at the forefront of your mind at every stage of your strategy. Talk to your customers, try to put yourself in their shoes and treasure those who have given your business a chance.
Loyalty schemes are a great way to incentivise continued loyalty, and referral programmes can be a great way to get existing customers to recruit new ones. Remember that a satisfied customer is the best form of marketing and can yield an extremely high conversion rate.
Don’t forget to ensure that existing customers continue to receive communications from you, as it is far easier to sell to someone who is already known to your business than a complete stranger.
Failing to communicate clearly
Much can get lost in translation, and while communicating with your customers can seem as easy as making a post on social media, it is important that you scrutinise all communications to ensure they clearly transmits the appropriate value propositions in a clear, concise and compelling fashion. If you have uncovered a key selling point, make sure you communicate it effectively to the public.
Many companies have garnered bad publicity with badly worded communications, or been dismissed due to ineffective or unclear communication. Don’t let that happen to your business. In order to communicate effectively, you will need a deep understanding of your customer base.
Use the sort of language they would use and ensure your message is clear at all times, you are concise rather than meandering and that things are put across in a compelling manner that yields a high conversion rate.
Unfortunately, there is no secret formula for business success, and the most successful entrepreneurs are able to combine excellent strategy and logic with creative thinking in order to build a successful brand.
By not making the above mistakes, you have a higher chance of avoiding the fate of many failed businesses and, with adequate passion, ability and foresight, seeing your small business grow into a large and successful company is very achievable.