Small-Business Strategy: Course of Action for Small Business Founders to Increase Likelihood of Success
Think back, when did you decide to start your business? What motivated you?
Is it that you wanted a flexible means of income? Did you want the independence that comes with self-employment? More time with your family? Were you tired of playing it safe with your regular paycheck?
Maybe you wanted to chase the respect and prominence that comes with building your own business empire? Or maybe you wanted assurance that your future generations will be taken care of financially? Or were you just plain tired of living your dreams in your head alone?
Either way, for whatever reason, starting your own business took courage. Most people prefer the comfort of a regular salary, avoiding the risk and uncertainty of a personal business altogether.
Being a small business founder has demands that are not suited for everyone. As a small business, I am sure that you will agree that it demands discipline, drive, and an eye for business, providing a service or product that people actually need; a product or service that either adds value or increases comfort in their lives.
Being a small business owner also demands that you develop your marketing skills because your customer-base won’t just find you at home. You will also have to familiarize yourself with the legal environment of your business and sharpen your accounting and financial management skills. Business owners need to understand how to budget, maintain records, and handle taxes…
These are just a few of the demands your small business will require from you in order to give it even the most remote chance of success. However, checking the above boxes is just not enough to ensure that your small business succeeds, that is simply the first step.
Think of it as a recipe. Once you have found a recipe for a meal you have been dying to prepare it’s simply not enough to have all the ingredients ready. You have to follow a systematic procedure and apply each ingredient in a very specific manner. Messing up how you apply any ingredient may prove disastrous for the entire meal. The same applies to your business.
You need a plan for your small business; you need a strategic plan that gives your business a real shot at success. You have to have a plan for how you will manage your business, how you will handle your business’s financial affairs, and how you will create a working marketing strategy. You also need to be familiar with why some small-businesses have failed in the past. What did these businesses do wrong? What did they fail to consider? How can I avoid the same disastrous turn out for my business?
Well… Have no fear… These are all elements we will be discussing in the next sections of the article. By the end of this read you will understand the main reasons why small businesses have failed in the past in order to avoid the same for your business. You will also have to be familiar with some of the most important strategic approaches applicable to your small business in order to give it a real shot at success.
REASONS BEHIND MOST SMALL BUSINESSES’ FAILURE
According to Forbes, 90% of Startups Fail and according to a recent Small Business Administration report, half of all new businesses survive the first five years but only a third of these survive 10 years.
I am certain you did not take the bold step of starting your own business with even the slightest intention of seeing it fail, right?
Of course not… I can’t think of any person who started a business with failure as their agenda. But nonetheless businesses, especially small businesses, fail every day. How can you avoid this for your business?
The answer is not to bury your head in the sand, doing your personal best, and assuming that this business you are so passionate about will not fall into the same fate. No. The answer is to confront the issue and probability of failure upfront. Much like war, ask yourself what your fallen predecessors did wrong and how you can approach the situation differently.
Your business will be less likely to fail if you can avoid actions committed in the past that led to failure of past small businesses. Therefore, let us educate ourselves; let us look at the top reasons why small-businesses fail and how you can avoid them.
Ask yourself, why am I founding this business? Am I passionate about it or do I simply want to avoid ever working for someone again? Or maybe I want to make a bunch of money? Or is it that you want more time with your family?
These are all the wrong reasons to start your business. Don’t get me wrong, there is nothing wrong with wanting to make a lot of money or being independent, but making one or two of these factors your sole motivation could lead your business to failure because they are not enduring or sustainable motivators and quite frankly, some of them are quite unrealistic. Of course you will have to work… Of course you will be answerable to your business…
A lasting motivator is starting a business about something you’re passionate about, something you genuinely love and that you strongly believe in. The question you should honestly ask yourself here is; have I chosen a line of business that I can keep persisting in even when others throw in the towel? Do I have the right attitude, the determination and the patience to nurture this business for as long as it takes? If the answer to these questions is NO, you may have founded your business for all the wrong reasons and you may end up failing.
Also, have you considered whether you are a person who thrives under leadership or in independence? One can argue that some people were put on this earth to lead and others to follow but this is business and you have to approach the subject from an honest point of view to avoid future disappointments. Some people naturally thrive under leadership while others thrive in positions of leadership themselves, and that’s okay, we all have our talents. What you need to consider here is; do you thrive in leadership or under leadership? If you thrive in leadership, do you have the skills to take charge and manage a business? Do you have the capacity to create intelligent and creative solutions when your business is under numerous constraints?
If you thrive under leadership and you are still determined to establish that business, it does not mean that you are automatically doomed for failure. All you have to do is build on your leadership skills and capacities before going too far into your business. Ensure that you are equipped to run your business and you have mastered the mental stamina necessary for a position of leadership and its imminent challenges.
The most important quality here is honesty. Honestly reflect on whether you are starting your business for the right reasons. If you come to the conclusion that your idea was based on corrupt motivators, then it is time to take a step back and reanalyze the situation to avoid possible failure. Remember, the goal is to give your business the best shot at success.
A Poor Business Plan
Another major reason why small businesses fail is because of poor business planning.
I had a teacher in high school who would always tell us, “Failing to Plan is Planning to Fail.”This is true… You can’t just ‘wing it’ in business and expect to succeed.
For example, let us assume that you plan to establish a wholesale wine distribution outlet and you go ahead to establish it without considering that the population of that area is mostly comprised of Muslims who do not consume alcoholic beverages. There are also no local retail outlets that can purchase from you because the market is scarce. No matter how hard you try, your new business may never build a strong enough customer base to sustain your business let alone give you the desired returns.
Careful planning is the determining factor for the success of any business and small businesses fail due lack of a proper planning. Sure you have a seemingly good idea and you have brought together all the necessary ingredients but you still need a good plan that will give your business stability and direction.
Due to the excitement of launching their business and realizing profits, small business founders neglect preparation, which includes the development of a well-detailed and conclusive business plan. You need to avoid making the same mistake and create a business plan that will steer your business towards success. Without a good business plan you will not be able to plan for the future and you will not realize the potential challenges facing your business and I assure you, you will be blindsided.
To avoid failure of your small business due to poor planning, ensure that your business plan is conclusive, realistic, and based on credible information, and accurate projections for the future. Your business plan must describe in detail your business’s vision, objectives, targets, work force needs, potential solutions to problems, competitive analysis, marketing/promotional/advertising strategies, sales and expense forecasts…
To avoid failure of your small business, ensure that you have a realistic and comprehensive business plan. Some businesses even use software that makes it easier to track the progress of the business in line with the plan. Your business’s plan does not have to be ten pages long so long as you have a good, working plan.
Incompetent/Unreliable Employees and Management
Poor management is detrimental and not just in business, but even in life. We have watched so many greats, for example George Best of the Manchester United football club, fall because of decisions they made. This can be used as an example of poor management of one’s personal life.
Businesses are no different, poor or weak management of the employee-base is a leading cause of failure for many small businesses. Think of your small business as a new born who needs all your attention to ensure that they are in good health at all times and that they receive regular nourishment.
For most small businesses, labor is one of the most important assets, these are the people who will lay the foundation of the business and actually determine the strength of that foundation. If a small business has an unproductive employee base, it loses valuable resources and opportunities for growth and success. Most small businesses tend to be so enchanted by the service or product they are offering the customers that they forget to analyze themselves internally, eventually causing them to fail.
Lack of good management is also a contributing factor to small business failures. Who is the management in a small business? You are… the founder.
Effective management on your part is necessary if your business stands to succeed. I know you are a dreamer and that is why you ventured out to start your own business but put that aside and be objective. Your business may not be as perfect as you may like to see it. Your objectivity is needed in analyzing your employees, objectivity is needed to recognize that you need expert personnel in a certain aspect of your business or that you need to let go of a redundant section of your employee-base. Make it a priority to pool skills to strengthen your workforce and to simultaneously weed out weak aspects of the force.
On the other hand, another reason why your business might fail is because you believe you can handle everything alone. You refuse to delegate roles. I am sure that you have heard the phrase, “If you want something done right, do it yourself.” While this might be true in most cases, it is impossible to keep up with in business. This attitude in handling your business will lead to a burnout that will make it impossible to properly manage your business at all. This excessively ‘hands-on’ management approach has also led the downfall of numerous small businesses and you want to ensure that yours does not fall victim to the same.
So what is the solution?
The solution is to surround yourself with reliable employees that you feel comfortable delegating duties to, ensuring that no one person is overwhelmed while at the same time ensuring that all the delegated duties are being executed properly.
Imagine you are going on a long journey and you can only fuel your car now because there is no other stop until you have arrived at your destination. Wouldn’t it be wise to fill your tank with a sufficient amount of fuel? Won’t an insufficient amount of fuel definitely leave you stranded?
Similarly, starting a business within sufficient capital will most certainly spell doom for small businesses. For a small business, if you do not have sufficient capital for the first six months or until the business breaks even, your chances of success are slim.
Remember, this is not that regular paying job that you might be used to. When you are the one running the business it is also important to account for delays from your clients who might sometimes take months to pay for services or products. This delay must also be accounted for in calculating the amount of capital you need for your business. You should also be prepared and account for unexpected cost increases, for example, in utilities, labor, and materials…
It is also advisable to employ the services a financial advisor to discuss your financial plans in detail. This is because it is not simply enough to have sufficient financing. An informed approach in managing your finances will also be a determinant on the success or failure of your business.
Of course you do not want your small business to stay small forever. You want it to grow, and this is the desire of every person who has ever started their own business. However, overexpansion is a serious mistake.
This is possibly the heartbreaking reason for small business failure, to be ensnared by the founder’s own ambitions. Overexpansion is opium to a small business and you can easily overdose chasing a high you cannot handle… yet.
By overexpansion I mean taking on added overhead costs in an attempt to be number one in marketing your services or products, or trying to prove growth to investors can lead to some serious financial strains on your business. It is a much better approach to set realistic goals and expand at a healthy pace, as the need arises.
This overly rapid expansion occurs when the founder mistakenly confuses his business’s success to the rate of growth. This is the line of thinking that leads businesses into bankruptcy when they have barely taken off. Understand that growing a business does not happen overnight, it takes time and it takes patience.
Prior to expansion, carefully analyze what your business needs in terms of a customer-base, employee-base, systems, and facilities. Once these factors have been solidified, your business will realize steady profitability and at that point you can begin to consider gradual expansion. When you want it all in an instance you tend to focus on the expansion itself and forget to consider whether your business can handle the strain, which eventually drains your profits.
When it comes to growth and expansion, take it in small doses; be gentle to your business. Less is more.
Being Out of Touch with Consumers
One of the reasons small businesses do not succeed is failing to understand just how heavily consumers determine their success. Think about it… your consumers are the whole reason your business exists in the first place.
Your consumers hold the keys to your success in their behavior, values, and their satisfaction and dissatisfaction. In order to stay in touch with your consumers and understand their wants and needs, reach out to them regularly, preferably in person, which is far more effective than a quick email or text.
According to the The Cluetrain Manifesto, Markets are conversations. Real, detailed, comprehensive dialogue with your consumers is the key to understanding them. Human beings are social creatures so find out what you can do to make your services better. Find out what elements you could introduce in your business to serve them better. Build a personal relationship with your consumers and they will feel valued and therefore develop an attachment to your business.
Let’s see why most businesses fail to establish a connection with their consumers…
Poor Marketing Strategies: Some small businesses are born out of quite feasible ideas but may fail to reach or appeal to the target market due to a poor marketing strategy. Good, effective advertising is vital for any business’s success.
Lack of Web Presence: The number of internet users and e-commerce sales has rapidly continued to rise over the years and businesses (even small businesses) that ignore this fact get left behind by businesses that have embraced the change. A company that expects to stay competitive in today’s business environment must therefore leverage social media as an advertising avenue and have an attractive website where potential consumers can learn more and interact with the business.
Just to put it in perspective how important web presence is to your business, in 2016, internet users in the United States are 85 percent of the population and in 2015, according to the US Department of Commerce, e-commerce sales totaled $341.7 billion. Therefore, if you do not have a web presence, you are losing valuable consumers and you are not fully reaching your potential consumer-base, which might prove detrimental to your business’s survival.
Staying in close contact with your consumers through all forms and mediums is imperative for your business’s success. This is how you understand their needs, preferences, pains, satisfaction levels, and it also serves as a benchmark that informs you on how to improve your products/services and stay competitive.
Other factors that may also lead to a small business’s failure are; Unprofitable Business Models, Underestimating Competition, Lack of Product Diversity…
I’m sure that the reasons for small business failure discussed above are a little worrying to you but I assure you… You are in control. You… the founder are the secret to your business’s success. In fact, many successful businesses started out as failures. But armed with passion, determination, resilience, and a resolution that failure is not an option, you are bound for success.
Have you heard what Thomas Edison said after numerous failed attempts to create the first light bulb? “I have not failed, I have just found 1000 ways that do not work.”
Learn to take failure as a lesson rather than the end of the road. But in order to increase your chances of success in your small business, let as explore the different strategic approaches you can take.
SMALL BUSINESS STRATEGY APPROACHES TO ENSURE SMALL-BUSINESS SUCCESS
There are numerous questions that go through your mind before starting your own business. What field of business do I want to engage in? Who is my market? Who is my competition? Am I making the smart move? Should I quit my day job? Will I succeed? …
Whatever your situation, whatever your questions, the following strategic approaches will greatly increase your chances for success.
Let Passion Drive You
Are you passionate about the business you have chosen to start? Is it enough to keep you going when times are tough and finances are scarce?
The answer to these questions should be yes. If the answer is no, it is time to read just the sort of business or the line of business that you have chosen to venture in. Don’t ever lose sight of your innate passion; this is the number one ingredient for the success of any business. A visionary who is willing to go to whatever lengths to ensure that his vision becomes a reality no matter how tough or how long that may take.
While considering your passion, also consider your strengths and interests.
For example, if you thrive in highly interactive environments don’t choose a business that will confine you to an office all day. On the other hand, if you prefer minimal interaction and become nervous around strangers, don’t start an advertising company. Your own business will demand a lot more time than you give when you’re working for someone else and essentially, you should choose a line of business that you wake up excited about, full of energy, and passion. Your business should be something that appeals to you and that you are also skilled at or at least honing your skills at.
Do not be afraid of going against the norm and do not confine yourself to your profession. Your passion and skills could in cooking, why not start a restaurant? You could be passionate about pets/animals, why not start breeding high-breed dogs/horses… that you could sell to security companies, individuals…?Almost any small business idea can succeed if you are driven enough to pursue it to whatever lengths it may demand.
Case Study: Benchmark Assisted Living
Jack McCarthy is the Senior Vice President of Sales and Marketing at Benchmark Assisted Living based in Wellesley, Massachusetts. He confirms that customers do not buy buildings, or prices; consumers buy the people in the business. “It’s not about anything but the people.”
He concludes that, therefore, if the product is people, the level of personal commitment of the people in the business is what will drive success. McCarthy is of the opinion that the only way this works is when there are people working within the business who are genuinely committed to their work.
The passion of a business leader drives progressive business decisions. That leader’s optimism will keep him ready to take a leap whenever an opportunity arises. Alternatively, when a particular project fails, a passionate leader will deliver a positive spin to the situation, concluding that, ‘the market wasn’t ready’ or that ‘it was a learning experience’ rather than ruling one hurdle as complete failure of the business.
Have a Comprehensive but Realistic Business Plan
As mentioned before, a good idea can only get you so far. Before you take any action in establishing your business you need a good workable plan and this means a business plan. A good business plan is a guide that enables you to plan for your business; it brings to your attention tough questions and helps you identify aspects of your business that need some more work.
Assume you are on the same journey we talked about earlier. You know where your destination is but you have never been there before so you will need a map for navigation. That is what a good business plan is to a business, a map, constantly ensuring that you do not derail, that you do not detour, and showing you where the shortcuts are if any.
Preparing a good business plan will help you as the founder of a small business to think through important issues and understand potential problems and how to deal with them. However, ensure that your business plan is a realistic one. We have already seen that blind ambition can lead to your businesses failure.
The aspirations reflected in your business plan must be realistic and correspond with your current capabilities. If you bite off more than you can chew your business stands to lose valuable money and time. Therefore, ensure that your business plan is structured to work within your limits. Remember, your business plan should keep evolving as your business gradually experiences growth, it just has to stay realistic.
Take it a step at a time, you will get to your destination, it’s only a matter of time.
Also an important and often overlooked part of a business plan is consideration of the competition. Understanding your competition is huge determinant for your business’s success. In order to compete in the field of business you have chosen, you must understand who the competition is and how they are going about their business. For example, What prices are they charging? What is the quality of their services? How can I deliver better services/products? What edge does my business have over the competition?
Running a small business is not easy and you need to stay hands-on until your business stabilizes. Sometimes you might lose sight of the end goal and your vision may become blurry during the tough times. To maintain a clear vision of your plan and get yourself through the tough times, you could consider using a Vision Board. Vision Boards keep you motivated and remind you of what your end goal was when you first began. What was the big picture? What were your targets? Why did you found this business? What do you stand to gain if you succeed? All this will be reflected in a vision board and will keep you motivated even through the toughest of days.
Think of marketing as a campaign for a candidate running for office. The better your campaign strategy, the more outreach you have on the masses, the more impact you make amongst the voters, and the greater your chances are to be elected. Marketing works in the same way, this is your campaign, tell the people about your business, tell the people your story.
Ensuring that you have an effective marketing strategy takes you a step closer to success. Marketing is what creates awareness for your business. Marketing is what sparks an interest in the consumers’ minds and hearts. Good marketing lures in new consumers and ensures a continued customer engagement. Your marketing strategy will guide your business’s culture, its services/product mix and its pricing.
As a small business founder, you need to develop an effective marketing strategy in the formidable stages of your business in order to carve your niche in the marketplace. To come up with an effective marketing strategy, you have to determine what makes your business unique from competing businesses in the market. For example, your business’s unique feature could be that you offer free delivery of products to customers, it could be your impeccable customer service, or specialized knowledge of the industry…
In the process of creating your marketing strategy it is also important to gather the opinions of your loyal consumers, employees, and friends. This will also not give you additional perspective on how to sell your business but also shed some light on negative practices in your business that you may have overlooked.
There are numerous factors to consider when creating an effective marketing strategy but four of these stand out. Who is your target audience? What unique benefit can you offer? Who is the competition? What differentiates you and your competition?
Once these factors have been carefully considered, employ the most effective channels to reach your target audience. For example, if your target audience is comprised of an elderly generation, television, radio, and word of mouth would be the primary means of advertisement. If your target is of a younger generation, social media and other internet-based channels are the most effective means of advertisement. If you have a mixed target audience, employ all suitable channels in equal measure to ensure your message reaches every group of your targeted consumer base.
To reach the level of the big players in your field of business, you need to put in extra effort in wooing your consumers. Remember… Creating an effective marketing strategy is not what established businesses do to retain their dominance; it is what budding businesses do to become established.
Case Study: Triumvirate Environmental Inc.
Triumvirate Environmental is a small company located in Somerville, Massachusetts in the United States. The Company provides waste management, education, life sciences, and other services. Triumvirate has harnessed the power of effective marketing, taking advantage of online and social media marketing since Mark Campanale became the media trainer at the company.
Mark informed the Company of the evolution and advantages of online marketing programs and Triumvirate gave it a try. Triumvirate was able to access a previously untapped market and subsequently attributed $1.2 million in revenue to blogs, (SEO) search engine optimization, Pay Per Click advertising, Facebook, LinkedIn…
Understand the Numbers
We are all aware that you need money to start a business, your Capital. But it is one thing to throw in seed money into your business and another thing altogether to have sufficient capital to sustain your business until it breaks even. Estimating realistic costs for at least six months and raising sufficient funds could very well save your business from the failure of many small businesses that didn’t take such caution.
Back to our journey… It is not entirely impossible that you would take a detour on your way to the destination, so you cannot just fill your tank with the exact amount of fuel needed to make a journey to a place you have never been to before. You will add a few extra liters that will cater for any detours from your route or for any traffic snarl-ups that will deplete some of the fuel. Similarly, when calculating your estimated costs, be sure to include reserve funds that should cater for any unforeseen operational costs. For example, if consumers delay in payment of services/products or if rental costs suddenly rise.
Additionally, once you are operational, there are six financial fundamentals that will determine the success of your business so it is important that you become familiar with them. These are also the elements that investors, bankers, creditors… will measure your financial performance by. These are assets, profit, liabilities, income, expenses and equity. On that note, as a business founder, it is important that you learn how to maintain books of accounts and get familiar with the three primary financial statements; balance sheets, cash flow statements, and income statements.
As a small business founder, understanding your numbers ensures that you can rule out financial issues, which allows you really focus on establishing your business in the marketplace and growing your customer-base.
Case Study: ACCA
ACCA (the Association of Chartered Certified Accountants) is a global body of professional accountants. From their vast experience they attest that good financial management is the core of running a successful business.
Financial management affects all aspects of the business, from management, cash flow, business performance tracking, and development of plans, which ensure that business founders capitalize on opportunities. ACCA concludes that financial management is most effective when used for the purposes of improving your business.
Insist on Proper Staffing
Your business’s interests come first so do not be afraid to recruit and fire guided by the business’s needs.
If you have an employee who does not share in the business’s mission, values, and purpose you have to let them go, regardless of how talented they may be. Every entrepreneur needs a driven team that is already sold to the business’s vision in order to succeed.
They say business is business and not to mix business with pleasure. But as Mark Cuban, owner of the New York Nets, “Business is always business. Business is always personal. All good businesses are personal and the best businesses are very personal.” So do not shy away from introducing your own personal touch from your business. Surround yourself with people you feel comfortable working with and people who are the best fit for your business’s mission.
Your business is constantly evolving and it will surpass certain personnel. You do not have to put up with inadequate personnel due to a misplaced sense of loyalty. If your business demands change do not lower those standards in order to accommodate a few individuals. Decide on the skills and capabilities of each position within your business and demand that the people holding those positions have them.
As a founder, your ability to be objective when it comes to the personnel your business needs is crucial to your success. Even with the most fitting personnel, work to maintain a standard that will keep them on their toes. Remember to lead by example and keep them motivated to push the business even higher on the success ladder.
Case Law: The Chia Co.
Chia is an Australian-based Company that is the world’s largest producer of raw chia seeds. Chia seeds are said to be high in fiber and Omega-3. The Company realized from the onset that it would not achieve success without highly skilled and motivated staff.
The company implemented a consultative management style that allowed their staff to contribute to the business’s strategy. The staff is expected to forward creative ideas and share knowledge freely. The combination of a skilled workforce and an engaging environment has motivated the employees to perform better. The Company has insisted on only hiring employees who believe in the company’s vision to make a difference to people’s lives. This ensures that every idea and every decision is founded on that vision.
The Chia Company’s success is rooted in their recruitment style, which ensures that each employee is competent for their job and that they are a perfect fit for the company. The Company has then gone a step further to create and an environment for the employees to utilize their skills to the fullest and help grow the company into the international markets.
Don’t Give Up
This is perhaps the most important approach for any small business founder. Never give up.
Founding your own business is not easy and being an entrepreneur means that sometimes you might fail. The most important thing is to keep learning, from mistakes, from examples of other people who have done it before you. Learn why some founders failed and why others succeeded and apply these lessons to your own venture.
By taking the step to found your own business you have already displayed bravery, you have already decided to take a risk that most people will not, let that motivate you through the toughest of times and as long as you keep learning you’re not very long from success.
Running a small business can be quite demanding. You are trying to ensure that your business stays afloat by boosting traffic and growing profits while simultaneously working on other projects. Nonetheless, we have seen small businesses beat the odds and survive in highly competitive markets. But if you are anything like me, you don’t just want to survive, you want to thrive. If you avoid the mistakes made by other small businesses and apply the strategies discussed above as you learn from each mistake then you are moving in the right direction.
The business world is created by entrepreneurs and founders like you who are shaping their own destinies and small businesses are particularly beautiful because they are mostly driven by passion and a small team of likeminded individuals who share a common dream. These small players contribute heavily to the local community as well as the national and international economies. Therefore, take pride in your small business and do not let your enthusiasm die, not only now when you are just a small team but even later when you have hundreds of employees and thousands of customers.
Business success is not an accident, it’s a series of smart moves and a carefully thought outplan. A good business plan involves the development and implementation of effective strategies, which ought to be embedded in the business plan you create even before you start your small business. Effective business strategies will involve crucial areas such as, marketing, capital, labor, competition… which have all been discussed above. Try these strategies immediately for a successful small business.
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