As a small business owner, it’s easy to feel like the lone minnow in the shark tank. It seems like you have to swim twice as hard just to keep ahead of the payroll and payables.
It’s probably true.
But it’s also that extra effort that keeps your customers buying from you, instead of somebody else. They need you to make a profit. So kick it up a notch and raise your prices once in a while.
Small business is the cornerstone of any economy. It supports not only the needs of the customer but also the lifestyles of the owner and employees. If the business failed to exist then all these people would have to ‘plug-in’ somewhere else to meet their needs.
A smart business owner once said, ‘I have an obligation to my customers to make a fair profit’. This is true because your customers need you to keep providing the products and services they rely on. If you stopped doing that because it was no longer profitable, it would cause a problem for your customers.
Why Businesses Fail
Forbes reports that only between 45% – 51% of small businesses actually make it past five years. Beyond that, only about a third of businesses celebrate the 10-year mark.
Odds like that are not frightening to a strong entrepreneur like you. You would run through a brick wall to get that next contract that will feed your business.
If you were about to set out to climb 20,308 FT to summit Mt. Denali in Alaska, wouldn’t you want to know exactly how the 96 dead climbers before you had failed? In business, it’s important to step back from your entrepreneurial enthusiasm and reflect objectively on your progress. Consider why other businesses might have failed.
Be brutally honest with your bathroom mirror about the weak links that exist in your own business. Discuss these with key managers or trusted advisors. Take the time to discover any fatal flaws or reinforce-able cracks in the foundation of an otherwise growing business.
These are a few reasons why small businesses have failed:
Vision in a Vacuum
Having a great innovation that solves a problem is a brilliant first step. Having an idea that no one is interested in is a guaranteed flop. If you find yourself spending too much time trying to convince people, it might be time to move along to the next idea.
The best innovations take off because there are customers that are able to spot value immediately. If they view your idea as the solution to a particular problem they have, you’ve struck gold.
So before you sell everything you own to invest in your own brilliant idea, ask around a little. Talk to the people you believe are your very best potential customers, not just your girlfriend or french poodle. Ask them questions about their feelings and the problem you solve for them. Listen to them. Let them talk for as long as they need to. They will tell you exactly why they buy, not why you ‘think’ they buy. Scoop it all up, it’s magic marketing pixie dust.
You’ll be amazed by the useful information people will share if you just let them talk. Once you know what they want, give them that, plus a little more to delight them. Give the people what they want and they will pay you fairly.
If you are good, and a little lucky, customers will return for your product because solves the problem they have in a way that integrates smoothly in their life.
The King Always Has Cash
Being a dreamer full of ideas is a special skill but it can be as blinding as the high-noon sun. The truth is that working capital is what keeps things running. A lack of working capital is among the most common causes of failure. Statistics show that one-quarter of small startups never get adequate funding to get their business going. You need money in the bank to open a business because cash outflows always come before cash inflows. Getting that capital through family, investors, crowdfunding, or even SBA loans could be the difference between realizing your dream or watching it die.
Going to others to raise money is really hard to do. On the good side, it will put your business to the test. On the bad side, it will test your relationships. When you take investment money from someone things will change with that person. Money always comes with strings attached. Be sure these are clearly understood and you are willing to accept them before you take the money.
People Matter Most
Any team is only as strong as its weakest link. Just like the game Jenga, all it takes is one misplaced block to collapse the entire structure. Game over. Building a successful team takes a special kind of entrepreneurial sorcery. That and a healthy dose of good luck.
Having a strong and devoted team is the secret sauce for most small businesses. It’s hard to overstate the importance of people in growing a successful business. They become like family – only they need to show up for work. They grow in value as they learn the jobs that need to be done to make the business run.
Attracting great employees is just a starting place. Be attentive to employees’ needs because retaining great employees takes more than a paycheck. Wages will get them to show up for work, but employee benefits will have them feeling respected and cared about. Employees who feel like they matter are always more loyal, dedicated, and hard-working.
A healthy workforce is the key to your success. It’s important that employees are able to show up for work. Health insurance is no longer your best option for health benefits. More affordable options – such as medical cost-sharing from Scoop Health – are ideal for most people. Employees appreciate having something in place to help with big medical costs if something bad happens to them.
Survival of the Fittest
Charles Darwin coined the concept of natural selection where he noted that “in any free system only the fittest will survive.” Unless you are Elon Musk, no business operates in isolation. So once you carve out your niche, you need to figure out how to defend and grow your territory. How you choose to compete (or not) is up to you. If you can delight customers while solving any problem they might have, then those customers will pick you every time.
This can be especially difficult to do when you are a small business going against larger, more equipped businesses. But here are a few thoughts:
Stand Out in The Crowd
Some entrepreneurs think of competition as the enemy. This is a huge mistake. Competition is healthy! It can be leveraged to grow your business and to make you stand out. On the other hand, it can also eat your lunch. So, how can you use competition constructively and emerge as the rose among thorns?
Be Different and Own it!
There is something about every small business that keeps the customers coming back. It could be great prices, service or people, or maybe it’s all three. Get a fix on what makes your customers choose your business over and over again. Own it and emphasize it. Build on the strengths of your business and use them as your competitive advantage. Work on amplifying them to the point that your brand is known for the unique solution you provide to your clients.
With a little luck, others will come sniffing around to see what all the hype is about.
“The Only One in the Room”
Remember that time that they were at the DMV and, by some miracle, you received the most amazing customer service? Ok, that’s probably wishful thinking. But the point is, customers, want to feel valued and understood. They want their problem solved, and maybe a little bit more.
Follow through with what you promise. Go beyond what is expected. When the warm and fuzzy feelings are still fresh, you should remind them that referrals are the lifeblood of any small business. Give them a memorable experience that imprints your brand as the only solution to their problem.
In the technology world, they call it a “pivot” when a business changes its focus to solve a different problem than the original one they had in mind. Creative change is crucial to success, but it’s a balancing act between capital efficiency and making constant changes. We run the risk of equating change with progress. Constant small changes should focus on making customer processes smoother or your delivery better.
Innovation can certainly extend to product lines. However, significant capital needs should be considered carefully for reward vs risk. Get to know the customer’s extended needs and find creative ways or new products to solve them. Innovation is a sure way to keep your day-to-day business on the leading edge and a step ahead of the competition.
Is The Grass Really Greener on The Other Side?
The first way to compete is to be sure you water and fertilize your own grass to keep it green. But, it never hurts to check the neighbor’s lawn too. They might be using a better fertilizer that you don’t know about. You could definitely learn a thing or two from your competitors and even your noncompetitors in the same industry, only elsewhere. This is especially true when looking at competitors who are larger than you. They will talk more freely if they don’t consider you to be a threat. Know your market, understand your competitors and their strategies, and use this information to innovate and grow your business.
In the End David Wins and Goliath Falls
Throughout history, innovation has been toppling giants. A Kodak camera was once the only way to take a picture. Today Kodak’s top-selling product, camera film cash flows no more. One thing to remember as a small business is you have an advantage that big business doesn’t. You are nimble and you are closer to the customer. Use that advantage. Understand what people want and give it to them.
Be innovative and give them something that they won’t find anywhere else. Most importantly, leave them feeling delighted. Give them an experience that they will never forget – a reason to keep coming back.