If you’re a business owner, you run the risk that your business might fail…and you may not realize it’s happening until it’s too late. In fact, it’s a story told all too often, as 20% of small businesses fail within the first year, and 50% fail within five years. Ouch.
Why does this happen so often? Well, several factors contribute to business failure. Today, we want to fill you in on some of the most easily fixable problems you can avoid to keep your business from failing.
Here are five reasons your business might fail without you realizing it, and what to do about it.
In a snapshot, they are:
- You don’t have a clear mission
- You don’t have a clear vision
- You don’t track your financials close enough
- You don’t have a clear competitive advantage
- You don’t know your customers well enough
Let’s take a closer look at each one.
1. You don’t have a clear mission
Perhaps the most glaring reason your business might fail is a lack of a clear mission. Your mission is the reason you do business to begin with. It is the reason you get up every day and put your time and energy into your business. It is surprising how many small businesses have not taken the time to clarify their mission. As a business owner, you may have that drive within you to make your company great, but if your employees don’t understand it, and if they can’t apply it to their work, your business will suffer in the long run.
This is often evident in businesses that were started just to make money. Eventually, the culture reflects it and it gets hard to keep the best talent. Get clear on your mission and develop a mission statement that your entire team can easily remember and apply to their work.
2. You don’t have a clear vision
“Without a vision, the people perish.” Proverbs 29:18
People often confuse a company’s mission with their vision. A mission defines what your business was created to do and who it serves. Your vision is the future you want to create based on your mission. Basically, when you follow your mission, what kind of world does it create.
A vision statement is just as crucial as a mission statement. It clearly shows everyone where they are headed. All of your goals as a company should be built around the vision you have for the future. If your goals don’t match the vision, then they aren’t the right goals. Get clear on your mission, create a vision statement, and make sure everyone in your company knows it.
Simply put:
Mission Statement: Why you are doing something.
Vision Statement: How you are going to achieve that mission.
3. You don’t track your financials close enough
Unless you own a financial services business, you likely aren’t a professional accountant. One of the mistakes many business owners make is that they underestimate the value of tracking and planning their money. Sure, you may be profitable right now and everything may seem fine. But as your business grows, the lack of a financial plan becomes glaringly apparent. Issues can sneak up on you, especially as your team grows bigger than just you.
Many business owners have fallen victim to the IRS, bankruptcy, lack of growth, and several other issues that result from poor financial planning. Hire an accountant who keeps track of every penny in and out of your business. Plan for the future and build your business around solid money practices.
A CPA can help you track:
- Cash flow
- Expense reports
- Financial projections
- Represent you to the IRS should you be audited
- Maximize your tax deductions
- And much more!
4. You don’t have a clear competitive advantage
Your business might fail if you don’t compete in your market. One of the many pitfalls of starting a business just to make money is the inability to stand out in your industry. Eventually, you’ll have to compete on price, and then it becomes a race to the bottom. Whoever can offer the lowest price, wins. But there is another route you can take. Instead of focusing on how you can price your products or services to get more customers, consider increasing your offer’s value.
Your offer is everything that you provide a customer through your products or services. The right offer can increase the perceived value to customers, allowing you to charge more while also creating happier customers. For instance, if you provide oil changes, your primary service is the oil change, but you can increase the value of your offer by adding a “15 point” checkup, free top-off of fluids, free car wash, and vacuum cleaning, etc. Now, your oil change might be priced higher, but the customer will happily pay it because of the value of the overall offer. Find ways to improve your offer, and you’ll never struggle to get customers.
5. You don’t know your customers well enough
One of the reasons your business might fail early on is if you don’t take time to understand your customers. You start out with a product, get some customers quickly, but at some point, you hit a wall and stop growing, or you start losing customers over time. This happens because when some customers use your products or services, they leave reviews. If there is a “hole in your bucket” the customer will tell you. Bad reviews can kill a business. Good reviews can be a lifeline.
As a business owner, you need to always be listening to your customers to understand what is working well and what needs to be improved. If you don’t truly understand your customers and what they want most, you’ll eventually lose out to someone who does. Listen to the customer. Solve their problem. Provide great value. Keep them happy. They’ll come back again and again and tell their friends.
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