There’s never been a surefire formula to successfully creating and growing a small business. If there was, then 80% of small business owners wouldn’t go out of business during their first 18 months! While there may be many things that businesses that succeed have in common, it turns out there are generally just a few big reasons that so many businesses fail.
Lack of Funding
The biggest reason that small businesses fail is lack of funding. Many businesses won’t turn a profit in their first year (it took Amazon six years before it was able to post real profits). Plan for your future with at least two years of capital on hand to support your business. Having a fund ready to tap into for both operating expenses and unexpected costs could save your whole business from failure. Even if you do have two years of funds ready, expect to reach out for more funding every two years after that, just in case. The more prepared you are to face cash flow issues, the better.
Lack of Planning
Few businesses have a realistic five-year plan, let alone contingency plans in case something goes wrong. If a supplier backs out, or a vendor gives you faulty merchandise, how will you get orders out on time? If there is a delay, how are you communicating it to customers? If you experience a surge in orders, do you have an outsourcing partner like Ohio Valley Goodwill Industries that can help? The more detailed your plans, the more likely you will be to succeed. Speak to others in your industry for tips on business planning for the long haul.
Lack of Value
How is the product you’re offering different from the rest? How do you plan to communicate its differences? Is there even a market for what you’re selling? Too often, entrepreneurs start a business thinking about themselves and their goals first, instead of studying the market and potential customers. Identify the value of your product and craft a message about its benefit. If you can’t find a way that your product or service stands out from the rest, you may want to consider a different idea, or try testing the concept with a group of friends or colleagues to see if they can help you come up with new insights.