Approximately 4 out of every 5 small businesses close their doors within the first 18 months. This is according to Bloomberg, and is an astounding statistic. As a small business owner who works with mostly brand new businesses, it’s also a frustrating one. But, in the end, my business is not a statistic, nor are the start-up business owners that I work with. With that being said, I prefer to think of it as a challenge!
Only 1 out of every 5 businesses survive the first 18 months. Think about it. Given that my business is helping people start their business, if I allow that statistic to creep into my livelihood, then I’ll be one of those unfortunate 4. Our business model depends on our clients not only surviving, but thriving. No one can stay in business by giving advice that only works 20% of the time.
There are reasons that businesses fail. Fortunately, the vast majority of those reasons are under the control of the small business owner. Ultimately, staying in business is dependant on capital, the almighty dollar. As long as you have money, you can keep your doors open. But that’s too simple. There are reasons that some businesses make money and some run out. I’ve seen people start businesses out of their garage with $10 for business cards and are not only still in business, but thriving.
I challenge the notion that it’s all about capital. Whether you make money or lose money is largely dependant on the choices that small business owners make on a day to day basis. What do those 20% of businesses that make it past 18 months have in common? Glad you asked:
- A well thought-out, well researched, and flexible Business Plan. I covered this in a previous post, so I won’t delve too deeply here, but successful businesses have a business plan. They have devoted a substantial amount of time and research into building it, and they use it to monitor their progress and revise it regularly. Your business plan is your blueprint. It is your vision and your roadmap. Don’t skip this.
- The founder(s) is determined and has an unwavering belief in his business model. Entrepreneurship will test you. It will test your will to succeed and it will test your faith in your business. Now, if you have number 1 (above), you will have well-researched and fact based reasons to believe in your business model.
- The business is focused on the customer experience and building relationships. Small businesses are built (or should be) on the idea of a better customer experience. Unlike large corporations, small businesses need to build solid customer relationships if they want to stay in business. Customers are not numbers to a small business; they are the life-blood of your company. Above all, they are people. Treat them like people, like friends, and they will be there for you in the years to come.
- A creative marketing approach. Successful small business owners don’t just “think outside the box”, they reinvent the box. Unless you are offering a product or service that NO ONE ELSE in the world offers, you need to find a way to reach customers that no one else in your niche are reaching. You need to find ways to stand out. You need to do things to market your business that your competition isn’t doing (or hasn’t thought of).
- They are lean budgeting masterminds. They know how to build a budget and how to stick to it. By building a budget, I don’t mean cut all expenses to the bone and run their business like Ebenezer Scrooge, counting every penny. A proper budget allocates proper funding to the proper departments to insure long-term growth and success. For example, successful business owners don’t cripple their marketing budgets just to make their bottom line look better.
- Flexibility and adaptability. This is one of the few superpowers that small businesses have when compared to large corporations. Small businesses not only have the ability to spot and adapt to trends and changes in the marketplace, but in fact MUST do so in order to survive. Stay flexible. Don’t lose your ability to adapt. When a new trend hits, take advantage. Larger corporations will eventually adjust, so make sure that you beat them to it.
- They have efficient processes in place that maximize execution of their business model. What does that mean exactly? It means that small businesses that are successful are masters of finding and eliminating waste in their processes. From order taking to production to invoicing, successful businesses execute with maximum efficiency. This is another inherent advantage for small businesses. Bottom line, if you want to be successful, make sure that your processes are lean, efficient, customer friendly, and waste free.
- Business Metrics. In a previous post, I talked about the importance of using metrics in your marketing. Now I am talking about metrics for your entire business. Successful small business owners make use of metrics to monitor their “business health”. An effective owner always knows how his business is performing. You cannot make effective business decisions without knowing your metrics. If your business is getting overloaded with customers, it may be a better idea to invest in streamlining your processes or adding headcount than to double your marketing budget. Without knowing the state of your business, you would not be equipped to make this decision.
- Competent Management with appropriate industry experience. Small business success starts at the top. A competent and experienced manager is potentially the most important thing that a small business can have. An extraordinary number of businesses fail for this reason alone. I don’t think I need to delve too deeply into why this is important. If your small business does not have very much experience at the top, you need to hire a consultant in your industry. Plain and simple, this is a killer.
- A unique or superior value proposition. What makes your business stand out in a crowd? Do you offer something that no one else does? If not, what sets you apart from your competition? What gives you an unfair advantage in the marketplace? If you don’t know the answer to these questions (or even worse, if the answer is “nothing”) then your business will fail. There is no way around this. You MUST give your customers a reason to buy from you and not from your competition. Make this a priority.
To sum up, 20% doesn’t sound like great odds, but if you follow in the footsteps of proven successful businesses with the secrets above, I promise that your odds will increase dramatically. There is no 100% path to success, but with the right decisions, behaviors, and work ethic, I believe we can come darn close.
Bill Price is one of the founders and COO of Business Begins Here LLC. He has over 16+ years of experience in Business Management, e-Commerce, Customer Service, and Project Management across multiple industries. He is passionate about helping entrepreneurs start and grow their dream businesses. In his spare time he likes to learn languages, watch sports, and dream big dreams.