Opening a small business is intimidating and methodical. But keeping this small business on a path of success is even harder. Even with passion and a good concept, there is a chance your business may face tough times and potentially close shop indefinitely. The tips listed below can give your company the tools it needs to remain successful in a completely unpredictable economy.
Why Do Most Businesses Fail?
You probably know the quote, “By preparing to fail you are preparing to fail” by the great Benjamin Franklin. When it comes to starting your own business, you really can’t get better advice than that. One of the main reasons businesses fail is because they aren’t properly prepared:
- Underdeveloped Concept or Plan of Action: This entails areas of the business such as marketing, knowing how many employees you need, knowing your brand and how to stand out against competitors.
- Lack of Cash or Funding: Before opening your business, meet with your accountant to have a better idea of how much money you need to successfully start and maintain the company. Many business owners find they don’t necessary make any profit the first few years of business as they market and acquire customers. Your accountant can help you understand the cashflow you should have and how to get additional funding if needed.
- Lack of Expertise: Just because you have an awesome business concept, doesn’t mean you are an expert at running the actual business. Consider partnering with someone who is an expert in this field. If you are making a new invention consider hiring an engineer who can help you draft the model and build a demo. Perhaps you are opening a restaurant because you want to get your family’s recipes out into the community. You need to have proper restaurant management in order for the day to day operations of the business to run smoothly.
- Know your strengths and accept your weaknesses. By doing so, you can allow yourself to get the help and expert knowledge needed to succeed.
Tips to Prevent Failure
- Know Your Financials: You should know your financials inside and out from the moment you have a business concept. Prior to getting started, you need to raise money, get investors, or find funding to produce and manifest your concept. Once you have enough funding to start the business, it is imperative that you continue to review your financials on a regular basis! Make it a point to meet routinely with your accountant or bookkeeper and go over your financial reports and your profit and loss statements. If you set time aside regularly to review this, you can see how the business is doing and where it can improve. Rather than being blind-sided when your business runs out of money, you can see how the business is doing regularly and make a plan to ensure you remain profitable.
- Know Your Brand and Customer: By knowing who your client is and how to appeal to them, you can attract more business. More business=more money! Choose a marketing team that understands your voice and can set you up with a website or app that appeals to your target audience. In addition to marketing, determine if your business is located in an appropriate area based on your clientele. By really knowing your customer, you can anticipate their wants and needs which result in a positive customer experience. If customers leave happy, they often come back to your company and also spread the word, giving you free word-of-mouth marketing.
- Have and Review your Business Plan: Your business plan is essentially your map to success. When in doubt, refer to this gem! Your business plan should guide you on your goals and how to achieve them. If business isn’t going as planned, refer to your “map” and see how you were going to achieve your original goal. Perhaps you need more funding. Your business plan will layout how much funding you were going to have and how you were going to get it. Follow your plan and you should hopefully be able to stay on track to success.
- Your accountant can help you review your existing business plan or create one if you have yet to do so.
- Seek Help When Needed: If you find yourself struggling in a certain area or being stretched too thin, then it is time to hire help. Don’t put off getting assistance! This can literally be a life saver for your business. If you find you need an expert in your business field, then hold interviews and hire someone who can truly be an asset to your team. As your company grows you may need to expand staff to accommodate the needs of the business or clients. As business continues to grow, you may also find yourself needing help with the books. Rather than doing it all yourself, consider hiring a bookkeeper to your staff. You can also reach out to the My Accountant Bookkeeping and Tax Service Inc team as they also offer bookkeeping services.
- Cut Costs: Because you regularly review your business’s financials, you may see that it’s time to cut costs in order to save money. A few ways you can do this is to review your inventory and determine if other vendors may be able to service you for cheaper rates. You may even be able to renegotiate rates with existing services such as your internet or insurance provider. If they are unable to lower their rates, look elsewhere. Although it may be difficult, you may also need to consider reducing the staff. Labor is a huge expense. See if you are overstaffed and need to cut positions or reduce hours.
Everyone opens their business with high hopes and motivation! However, the world and economy are unpredictable and the last two years can attest to that. Although no one wants to open a business knowing it may fail, it is important to know things can happen. Life can happen, which is why it is so crucial to know why businesses fail and how to avoid it. Knowing these tips to success should allow you to make empowered business and financial decisions.