Small businesses are prone to failure, and the first ten years are the toughest. Statistics generally state that a fifth will fold in year one, incrementally increasing to 70% by the tenth. The reasons for this are hugely varied, and the constant presence of failure is almost ingrained in the entrepreneurial psyche.
It’s one of the main reasons many potential small business owners won’t even start an enterprise. And yet the funny thing is that the same reasons will contribute again and again to many different types of start-up and their failures. By understanding a few risks and managing them, you can significantly improve your odds as a business owner of surviving those all-important first few years of life.
Legally Bound
Administrative needs are multi-faceted in small business ownership. Taxation, employees, expenses – all of it takes time and costs money. Foremost among the jobs you need to cover, however, is insurance.
Insurance applies to many different aspects of small business, but a claim against you or a failure to fulfil an obligation hits small businesses where it matters most; in the wallet. In specialist industries, like construction or logistics, where the risk of accidents or injuries is higher, one legal claim that you lose and are held responsible for can wipe out revenue for several months or more. Investment in legal advice and a robust business insurance policy should be budgeted for, to the same extent as revenue-centric efforts like sales or business development.
Familiarising yourself with the variations of most common legal claims and types of personal injury that your employees or customers might be exposed to on your premises or on the job is part of your responsibility if you want to be covered for incidentals. Failure to pay attention can spell disaster even for any successful business.
Understanding Branding
Marketing might seem like a luxury in some ways, to a small business. When resources are slim, throwing money around at will in online advertising or billboards just isn’t an option. But understanding your audience and having a strategy for marketing doesn’t have to be expensive. And it should be a priority.
If you’ve got a website, dig into your analytics to see how and who is visiting. If you’re signing customers, find routes to receive feedback, through emails or in-person. Starting to paint pictures of your audience is part of finding both segments you can target in future, understanding what types of advertising worked (or didn’t) in the past and, crucially, growing your brand awareness. Whatever type of business you are, brand recognition and awareness – even on a local, national or global level – is the key to growing opportunities and new business.
Failure To Plan
Maybe one of the biggest core pieces of a business is its plan. Forecasting where you want to be in five, or ten years – and how you’ll get there – is the north star that everything else can flow. The way you hire and the products or service changes you make are all guided by this plan. The core tenements of a good business plan are as follows:
- A boilerplate, and concise description of your business
- Business needs, now and in the future (management, resources, etc)
- Competitor analysis
- Marketing profiles; the sorts of people you’re selling to
- Projected cash flows
- Marketing strategy
Some of this will change as external environmental factors take shape but that’s a good thing; a business plan should not be rigid. Your blueprint for the future is how you avoid aimless or misjudged decisions in the future.
Sometimes you can feel as if you’re getting everything right and things don’t pan out. In entrepreneurial exploits, it’s more a fear of failure or lack of planning – things you can control – which you need to combat. The reasons mentioned above have ended many small businesses before they even get going. Legal, strategic and administrative preparedness are the backbone of small business – without them, the best-made plans cannot stand for long.
Tips on a successful business start-up
Success comes from more than just a good business idea, you were need a decent level of business acumen and a marketing plan to your target market. You should consider the following:
- Have a sustainable business model based on organic growth. Focus on not just new business, but providing a good service to keep your current customers loyal.
- Don’t hire too fast unless there is a business need for them and the work required covers the wages and the time taken managing employees.
- Manage your finances well – avoid taking a business loan and focus on spending profits and not the available cash flow. Spend money to make money, and not frivolously on vanity projects.
