Sad businessman standing near sales chart
Running a business is about managing a lot of moving parts. From legal considerations to bookkeeping to HR, there are about a million things to consider and a million things that can go wrong.
And the statistics bear this out: only about 50% of small businesses make it to their fifth year. So what is it that puts your business at risk?
Below we’ll take a look at the six reasons your business will fail this year, and what you can do to save it.
- People Don’t Need Your Product
This one seems obvious: your business will fail if people don’t need what you’re offering. Assess your future clients’ needs, see what your competitors offer, understand what it is that’s lacking in your competitors’ product or service, and figure out how you can deliver that missing element. This process is known as defining your unique value proposition, and if you don’t understand how to create a product that’s new, different, and necessary, your company will eventually fail.
This means getting out there and actually talking to future clients. Share your ideas in-person with focus groups and use social media and email marketing to solicit feedback via surveys.
- You’re Not Competitive in Your Market
Understanding your market is also a critical step to take before you open your doors. If your passion is baking, you may want to open up a bakery, but what is the market in your hometown? Is there already a bakery? How successful are they? Do they have a particular focus (wedding cakes, donuts, decorated sugar cookies) that is similar to what you hope to do?
If your town is already well-served by the local bakery, you can either think of ways to offer your own spin on things (create a bakery that focuses on French pastries), consider another market (open up in the town down the road that’s bakery-free), or think about pursuing another small business idea that still speaks to your passion (create your own line of baking tools for the home chef).
- You Lack a Plan
One of the most challenging things for first-time small business owners is creating a plan. If you’ve never run a business before, it’s likely that you’re overwhelmed by all of the aspects you need to consider.
If you’re at a loss on where to start, consider turning to a site like Bplans for a basic template. Building up a team of trusted advisors is also key. Find a lawyer with expertise in your chosen field, a CPA who knows your state’s tax laws, and advisors and mentors in your sector who can help you along the way.
It’s also important to remember that a business plan should be a living document. Your vision for your business should change as your business grows, so you need to be ready to revisit and revise your plan on a regular basis.
- You Don’t Have the Right Team
Assembling a team that is dedicated, smart, driven, and hardworking will be key to your success. However, finding and attracting the best talent can be a challenge, particularly when you’re a young company with limited resources.
First of all, understand what the going rate is. This list from Angel.co offers you insight into benchmark salaries and equity stakes for various roles based on market and location, which will give you a sense of how you should structure your compensation packages.
It’s important to think beyond salary, too. According to the Society for HR Management, benefits are a key component in retention, with healthcare being the number one concern for most employees. They also note that as Millennials become a greater portion of the workforce, benefits like flexible work options and student debt repayment assistance will likely become more coveted.
- Your Success Metrics Don’t Translate to Sales
You might feel proud that your company boasts tens of thousands of Instagram followers, but social media metrics are indicative of quantity, not necessarily quality. What really matters is that you have the right people following you–those who are actually going to buy your product.
Instead of focusing on amassing empty likes, work towards generating meaningful content across your social media platforms by creating shareable posts that will not only get the attention of current followers but also catch the eye of potential new clients. Offering perks to followers that will actually drive sales (such as coupons and first access to new products) or starting a contest to actively engage your followers will generate results that you’ll see on your bottom line.
- You Can’t Figure Out Cash Flow
Mismanaging cash flow is one of the greatest risks to a small business. Addressing this issue begins with practical forecasting and goal setting. Speak with a CPA who understands small businesses and your sector in order to generate a realistic picture of what your business’s expected costs and earnings will be.
From there, you need to make sure that you keep your books organized and avoid taking on too much debt. There are lots of great software programs out there to keep you organized; QuickBooks is best used in conjunction with hiring a traditional bookkeeper, while options like Bookly offer comprehensive bookkeeping services all online.
To avoid excessive debt, you’ll want to be careful about the loans you take on. Understanding the full cost of your loan and how much income you’ll need to generate to make it worthwhile is key. Loan calculators provide you with a comprehensive picture of what a given loan will cost.
Understanding some of the greatest challenges facing other small businesses can empower you to avoid those pitfalls yourself. Asking for feedback—from clients, trusted advisors, and your employees—is one of the best ways to learn about your business’s unique risks so that you can address them head-on and find success for many years to come.
The post 6 Reasons Your Business Will Fail in 2018 (And How to Save It) appeared first on AllBusiness.com
The post 6 Reasons Your Business Will Fail in 2018 (And How to Save It) appeared first on AllBusiness.com. Click for more information about Meredith Wood.
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