There is no agreement among experts on the percentages of businesses that fail. Recently, Forbes estimated that 80% of companies fail, while Fortune claims it is closer to 90%. According to the Small Business Administration (SBA), about 50% fail within the first year. Of those that survive, the SBA goes on to tell us, only about 66% survive the second year.
Whatever the number indeed is, most small businesses do not survive the first couple of years. Why is the survival rate so low?
In starting many businesses myself and working with small businesses owners as clients, I've come across five surprising reasons why small business owners struggle and fail. In this article, I'll point out these reasons, and by knowing them, you can avoid these pitfalls.
Reason # 1 – Don't know what product they are selling.
It is hard to believe that most business owners do not understand what product or service they are selling. They say "People come to me to buy flowers," "I'm offering insurance," or "I sell cupcakes." But the truth is, they are not selling a product or a service, they are selling a feeling or emotion.
Buying habits are based on feeling and emotions and are only justified by the use of logic. Let that sink in. People buy based on feeling and emotions and then defend it with logic.
Let's say you have a flower shop. People can buy flowers from many different sources these days. Supermarkets have flowers as do some convenience stores. Why should they buy from you?
What feelings or emotions can you promote that will set you up for success with your business?
Reason # 2 – Don't know who is their ideal customer
Many business owners will say that they don't care who their customers are. Just as long as they have customers, they are happy. They just want to have customers.
The truth is it is essential for you to know who your ideal customers are, and there are many benefits for this. When you work with your perfect customer, you do your best work because you enjoy working with them. You will be more inspired and fulfilled by what you do. You will connect with your customer on a deeper level, and they will more likely recommend you to others.
So, who is your ideal customer?
Reason # 3 – Don't know what makes them unique.
I come across many business people who believe that they will be successful just because they open their doors, have a website, or hang a sign up that says they are open for business. They think that the product they have will sell itself. Sometimes this can happen. However, it is an infrequent occurrence.
In this increasingly confusing world, information and products are continually bombarding your customers from all sides, and you need to stand alone to stand out. To do this, you need to be unique from all the other businesses out there doing the same thing you are. By being unique, your customer will recognize you and come looking for you.
What is it that makes you unique in the market?
Reason # 4 – Don't know how to promote the business.
When a business does not know what product they are selling, what makes them unique, and who their ideal customer is, they have a difficult time promoting their business. If you are trying to please and attract everyone, your message is too broad to appeal to anyone, and you waste a lot of time and effort with your marketing.
If a business is clear on what and who it is, promotion is simpler and more straightforward. Advertising becomes more targeted, and because of this, its success rate is higher.
In light of this, how can you now promote your business?
Reason # 5 – Don't know their end goal.
So what game are you playing? Many of the businesses I come across answer this question by saying they want to be successful. But what does successful mean? The answer is different for everyone. A company that does not know what their end goal of being in business is, they do not have a direction in which to work towards, and because of this they flounder around and never achieves their goals.
Knowing what your end goal is to provide you with a direction in which to work. Is your end goal to eventually sell your business for a profit? Or maybe it is to provide a comfortable life for yourself and your family? But understand if it is the latter, what does comfortable mean to you? What salary do you want to earn? Or is it that you want to spend more time with your family? Knowing the answers to these questions gives you a direction and a goal.
So what is your end goal?