We don’t want to put a downer on your enthusiasm, but starting a business can be tough. Research shows that about two-thirds of businesses survive their first two years, yet only about half survive for longer than five. It’s therefore essential to take a sober look at your business, to make sure you’ve got the foundations in place.
There are many reasons small businesses fail, but we’ve selected three of the most common causes. Let’s look at what they are and, more importantly, see how you can avoid them.
1. Failing to Manage Cash-flow
Many new business owners will have gotten used to a monthly pay check in their previous career. They therefore expect that payment from clients will come just as regularly.
Sadly, this is often not the case.
Cash-flow is one of the biggest killers of small businesses. Clients can take literally months to pay for your services, so if you don’t have enough money saved up to keep paying your rent and expenses, especially in the early days, you’ll run into trouble.
How to manage cash-flow like a boss
Before you launch your business, you need to estimate your income and outgoings for year one of the company’s life. To be safe, you should save enough cash to keep you going without any payment at all for at least six months, and preferably longer.
2. Not Enough Planning
Many businesses fail because they lose their way. They start working on the wrong kinds of projects, with the wrong kinds of clients, for the wrong kind of pay. Instead of focusing on a specific niche and working with the right kind of customers, they take any work they can get. This means work is inconsistent, there’s no organized marketing plan, and they bounce from one job to the next until they eventually run out of steam.
How to plan like a boss
It’s essential that you develop a business plan. A business plan is a simple document where you outline:
• Your business’s purpose and goals
• A description of your product or service
• Sales and marketing activities
• Competitor analysis
• Key Performance Indicators
• Income and outgoings
By following your business plan, you will focus your energy on the right kind of work and build a solid base for your business.
3. Not Enough Marketing
Many smaller companies and entrepreneurs see marketing and advertising as an unnecessary expense, with little obvious return on investment. To begin with, this might be true, especially if you get a lot of initial business through your network. However, the only way to grow is to make people who don’t know about you (yet) aware of what you do. Failing to do so will mean you only have a small pool of existing customers, and these will likely not offer enough business to keep you going long term.
How to market like a boss
You need to decide on a consistent marketing strategy which is right for your customers and your means. Read our introduction to getting more leads to help get you started.