In the real world, Business failure is a harsh reality.
According to a stat by fundera.com, 20% of small businesses fail in their first year, 30% of small businesses fail in their second year, and 50% of small businesses fail after five years in business. Finally, 70% of small business owners fail in their 10th year in business.
While 80 percent will make it past that first-year mark, the rate begins to drop off substantially each year thereafter. Only about two-thirds of all businesses with employees are able to survive their second year. The fifth-year? Just half. Ten years out? Just 30 percent. That means that seven out of 10 businesses will fail within the 10-year mark.
For the businesses that survive failure, the majority of them struggle for many years, just holding on for dear life. This is particularly true for small businesses.
As entrepreneurs, we hardly look at these stats when we want to start a business. We get the business idea and we jump right into action. We deal with the business issues as they come up and when we can’t, we become just another statistic.
So, why do most businesses fail?
If you’re an entrepreneur, you’re passionate about your business. And with so much demand on your time as a business owner, it’s easy to be caught off guard.
If you’re not prepared to deal with the ever-growing challenges of running a business, you could easily find yourself on the streets of failure.
If you want to avoid business failure, there are definitely some things you should be doing, and other things that you shouldn’t be doing.
From my experience running my own business and working with many business owners, here are the top 5 mistakes business makes that eventually lead to business failure. Do your best to ensure that you address these before they address you.
Mistake # 1: Failure to focus on a niche market
When we started our accounting business, we did not know at a deep level who we wanted to serve. We did not zero in on a specific niche of the market.
We did not do market research to understand the competitive landscape. As a result, we did not have a better product or service to offer to clients. And we could not add significant value in the process.
At the heart of any business is value. The world’s most successful businesses deliver the most value. And if you don’t have a niche market that you understand thoroughly, it is impossible to add value.
If you don’t know your clients, you don’t know their pain. If you don’t know their pain, you can’t develop a product or service that will address their pain. Ultimately, this will lead to dissatisfaction for you and your clients.
And there are other costs. Your marketing will be expensive, unpredictable, and ineffective. Your internal processes will be challenging to manage as you deal with a wide range of clients requiring different services and products. Your employees will be unhappy as they have to learn so much more to serve a broad range of clients. And the costs go on and on.
If you want to build a business you love, you start by finding your ideal customers. Once you find your ideal customers, you will learn more about them. You will know more about your market. And you will be in a position to design the best products and services to serve them.
Consider using focus groups, market surveys, email ask-campaigns, or straight-up phone calls, to understand and connect with your target market better. Discover who they are right down to the most minute detail. That’s one way you’ll avoid business failure.
Mistake # 2: Failure to build a strong and deep relationship with your customers/list
Realize that wealth is in the lists of the business and the relationship with that list, not in the stuff you sell. Use your list to build relationships with your clients and prospects and to offer your products and services.
Be careful when using your list and ensure you’re offering something of value first. Avoid the temptation of bombarding your lists with your products and services without providing something of value to them first.
Remember, it is not the size of your list that is important, it is your relationship with your list. Of what use is your list if no one opens your email? You’re not reaching anyone with your content and you’re certainly not impacting lives if no one opens your email or hears from you.
If nurtured correctly, your list is an asset that has value. Russell Brunsun, an online marketing entrepreneur, often says a name in your list is worth at least $1 per month. The better you nurture your list, the more it is worth to you.
By nurturing your list and spending time to intentionally make good use of the opportunities you have to engage in deep meaningful conversations with your customers can yield great results for your business.
You can learn more about this in an article I share recently here.
Mistake # 3: Poor cash flow management
According to a CNBC report, one of the primary reasons businesses fail shortly after their launch is running out of cash.
So, if you’re considering starting a new business or if you started one recently, you must take steps to ensure your cash flow management is strong.
Read this article I share recently on the 7 ways you can manage cash flow in your business.
Mistake # 4: Inability to control expenses
Every business will have overhead expenses that must be managed closely. However, many businesses don’t manage these carefully by using a budget and by tracking on a regular basis.
Often times, it is easy to spend when the coffers are full. But having a system in place to control the company’s expenses is imperative.
When the expenses get out of control, it’s impossible for the business to survive. So, make sure you have budgets and processes in place to ensure actual expenses are monitored and compared to the budget on a regular basis.
Mistake # 5: Failure to create effective business processes and systems
From marketing to sales and to operations, business systems are required to automate various business processes and ensure the efficient delivery of products and services to your customers.
You have to automate your sales process using sales funnels to run a successful business that’s built for the long term.
You need to implement CRMs (Customer Relationship Management) to manage customer relationships seamlessly.
You require various policies and tracking procedures to effectively and efficiently manage your operations. And the list goes on and on.
Without a good deal of systems and automation, the amount of work becomes overwhelming and the details can easily be overlooked.
So, consider these when you’re considering starting a new business and position yourself for success.
P.S. The simple truth is this, starting and running your own business is hard. Just consider this, why would 70% of all new businesses fail within 10 years of starting if business was easy? So, it’s obvious that running a business hard. Thankfully, we know this because we’ve lived it. In fact, we’re living it every day and have been doing so for the last 8 years. And here is the important thing we’ve learned:
Business is hard if you’re not prepared for the business you’re creating. If you prepare by building the right mindset, learning the language of business, investing in your personal development, and investing in the right business coach and mentor, then business is not as hard.
If you’re looking for an amazing business opportunity providing a service that is growing in demand that will start generating guaranteed cash flow in a short period of time, check out this opportunity here that we’re currently offering.