Starting a small business is a big step for any person. For most entrepreneurs, it means dedicating a lot of your life to making the enterprise a success. With so much of your time, money and effort poured into the endeavor, the success or failure of the business can have a significant impact on your life.
Unfortunately, small businesses fail all the time. In some cases, there might not have been much that could have been done to prevent failure. However, many small business failures come down to a short list of common causes. By being aware of these causes of small business failure and looking for ways to avoid them, you can set your business up for a much greater chance of having success.
Incomplete Business Plan
So many small businesses fail because the owner didn’t develop a complete business plan. Knowing that you want to sell a certain product or provide a type of service is just an idea. If you want to have success, you have to dig into that idea and create a plan for turning it into a successful business.
Beyond just having an idea, you need to figure out how you are going to fund your business. You will also need to work on a plan for marketing. Consider whether you are going to have a physical location or sell online. Do research to learn about the type of customer that is going to buy from your company. Depending on the type of business and your goals, there can be a lot of details that will need to be worked out before you get started.
Trying to Grow Too Quickly
Growth is an obvious goal for any business. With that said, if you try to expand at a rate that is too quick for your business, it can result in the failure of the business. Expansion is often funded with debt and if you take on too much debt as you expand, all it takes is a small change in the market to make your business unsustainable.
Expanding too fast can also lead to operational problems. If you take on too many new clients, you might not be able to handle the increased workload with your existing staff. This could cause a decline in the quality of your products or services. The decline in quality could then lead to a loss of customers, and if that occurs during the increased spending that often comes with growth, it could be disastrous for your business.
The Owner Trying to do Too Much
While running a small business does come with a lot of responsibility, business owners need to recognize their limitations. You only have so many hours in a day and you probably do not have the expertise to do everything that comes with running a small business.
If you can delegate some of the work to employees, that will make it easier for you to focus on the core tasks that come with running your company. You may even need to consider getting help from professionals for things like accounting and marketing. You also have different types of business software that can save you time and make some of the work easier.
Failure to Adapt
As a small business owner, you need to be able to recognize the need for change. Maybe your idea wasn’t as good as you thought it was. Maybe your idea was a success at first, but the market changed. Maybe there is a better or more efficient way to achieve the same result.
Regardless of why your company needs to change, you need to be able to adapt when the circumstances call for it. Don’t get stuck in your ways just because they used to work. Don’t get emotionally invested in an idea that seemed good to you but is not having success in the real world. Sometimes you just have to accept that you were wrong and start making moves to get your business on the right track.
Ignoring Customer Feedback
Your customers can provide insights you would never be able to uncover on your own. They use your product or service and they pay your business. If your offering isn’t serving them well or they don’t like something about doing business with your company, there is a good chance they will share their experience.
Instead of ignoring this feedback or viewing it as an attack, you should accept it with an open mind and see if there is a way you can use it to the benefit of your business. Read customer reviews if they leave them on your website; look for mentions on social media; try to conduct surveys to get in-depth information about the customer experience.
Rae Steinbach is a graduate of Tufts University with a combined International Relations and Chinese degree. After spending time living and working abroad in China, she returned to NYC to pursue her career and continue curating quality content. Rae is passionate about travel, food, and writing for Funding Circle. @araesininthesun.