According to the SBA (Small Business Administration), in 2009, 518,500 new businesses were born, and 680,000 died. Half of new businesses survive to their fifth year, and only one-third make it to their tenth anniversary. Why do so many businesses fail? There are reasons for which any business has little control including threats from the economy, technology, and politics. What’s different about businesses that survive? Are they luckier or better prepared to succeed? The answer is most likely a little of both, and they probably didn’t shoot themselves in the foot.
10. Not enough cash on hand.Any business that survived the economic challenges of 2009 learned this lesson. Lines of credit evaporated almost overnight, and cash reserves were exhausted. The companies that survived learned their lesson. Keep reserve cash on hand.
9. Not changing with the times.There are many examples of this. For example, look at the how times have changed from Blockbuster—to Redbox—to Netflix. Don’t be Blockbuster. Stay up to date with your market and customer.
8. Accounting confusion. Hiring an accounting firm doesn’t mean they have the same vested interest as the principles. Someone within the organization should always stay on top of accounting.
7. Not meeting customer needs or solving client problems. If your product doesn’t fulfill the needs and wants of customers, they will not flock to your door. Don’t solve the problem you wish to solve—solve the problem your customers have. Give your customer what they want.
6. Poor location.This problem is easy to recognize for brick and mortar retail stores, but it can be a problem for B2B and internet companies as well. Regardless of whether your business has a building or is online the main thing to consider is can customers easily find you?
5. Lack of effective marketing.Hit or miss marketing isn’t a plan. A marketing plan includes a budget, market research, and media reach.How to Begin a Marketing Plan.
4. Limited knowledge of competition.When a business flies in the dark, they’re liable to hit something. Staying abreast of your competition’s marketing efforts, products, and customer service will inform you of opportunities as well as threats.
3. No business plan.Not only a business plan but policies, procedures, and systems. The most likely outcome to flying by the seat of your pants is crashing.
2. Lack of product demand.It’s difficult to create a need for a product when no need exists. Finding a new answer to an existing problem or doing it better than competition puts the horse before the cart where it should be. Don’t create a product no one needs.
And the number one reason? Drum roll, please. No succession plan. Even the most dedicated owners, entrepreneurs, and CEO’s get sick, pass away, or simply move on. When’s there’s no succession plan in place the survival of the business becomes a crap shoot.
It’s a challenge
There are enough challenges to keeping the doors open on any small business without creating more. Threats come from the economy, politics, and new technology. Government regulations are ongoing and ever-changing. The mega store that moves in next to the mom and pop, changes in demographics, and buyer habits all impact the bottom line for small biz in America. There is no room in small business for self-destructive behavior. Are you in a small business, what are your biggest challenges?