As a small business owner, I am sure you have seen this statistic on small business somewhere on social media or through your reading:
“About two-thirds of business survive 2 years in business, half of all businesses will survive 5 years, and one-third will survive 10”
That could be a scary though for a small business owner, especially when it is family operated and you have given your 110% in trying to make it work. While it is virtually impossible to list out every event that could lead your business to disaster, and some of the most serious problems and challenges are the ones you never see coming, there are certainly some ‘obvious’ factors that contributes to an unfavourable outcome.
Many businesses struggle and eventually die as a result of common, preventable problems. Understanding those problems before they do serious damage, can put you in a position to mitigate them. Small businesses are especially vulnerable, with volatile and weak infrastructure and limited resources, but entrepreneurs can take steps to prevent disasters by looking for these common pitfalls. So, here are a list of 10 Pitfalls that Ruin Small Businesses and ways to mitigate this issue in your business.
Since 47% of small business owners handle marketing efforts on their own , it is no surprise that marketing is viewed by many business owners as a secondary need. But that’s not true. You can bet that your competitor is looking for ways to capture the attention of your customers. So, if you don’t give preference to marketing you won’t be able to attract more customers.
A solid marketing strategy is often built on planning and thoughtfulness. Consciously choose your marketing channels. The number one tip that can help you here is: Find out where your clients or customers are and go there.You can easily evaluate the result of your efforts and continually monitor your marketing strategy by establishing a KPI (key performance indicator) system. Try asking your customers how they found or heard about you!
While 72% of small business owner have a website, marketing effort needs to go beyond that . Utilise the power of digital and social media to make your product and services relatable to your audiences.
2. Poor Growth Speed
Many small businesses fail because they are not growing fast enough. Growing too fast is a problem as well. Not growing fast enough often means that you will be expending money, but won’t have the revenue or the customer to exceed it. On the other hand, growing too fast comes with a fresh set of problems.
Work closely with your human resources and marketing department to make sure that your business achieves a steady and reasonable pace of growth.
3. Underestimating Your Competition
Never should you underestimate your competition. Always have it in the back of your mind that competition can crush your business, especially if you have not taken the time to understand it fully. Startups that are formed around a new idea become overly confident and fail to keep a close watch on the market.
Competition is not really a bad thing, but you need to make sure you tactfully differentiate yourself in a way that makes your business seem more appealing.
4. Internal Strife
Internal strife can rip a business apart during its early stages of development. In many businesses, entire departments are completely reliant on a handful of people. If these workers decide to leave, the department will crumble. An entire company could be thrown into turmoil if there is a serious disagreement between the core members of the company. Many big businesses have fallen apart because of internal strife. Remember to keep and stay professional at work place and avoid any personal issues from impacting performance.
5. High Dependence
Too many organizations have failed because they did not diversify and completely putting all their eggs into one basket. It could be a highly valuable customer or a very talented and experienced worker. It could even be an environmental condition that makes the business to thrive.
Environmental conditions are definitely going to change. Workers can quit. Customers can opt out. You are setting yourself for disaster if you allow your business to be reliant on anything. Instead, you should consider investing in complementary dependencies and multiple variations. Always look out for more leads and opportunities, always put some funding aside to train your employees to become multiskilled.
6. Lack of Business Plan
Optimism and enthusiasm are essential for any business to succeed. But are they enough? No. No skilled sailor will be able to sail far if his ship is full of holes. Having a business plan is essential as it gives your business direction, defines your objectives, maps out strategies to achieve your goals as well as prepare you for possible bumps in the road. A well planned and crafted business strategy is essential to profitability.as it will help you work out the goals you want to achieve, and the strategies to achieve them. Clearly define your revenue streams and try to see how reliable they are. You should consider hiring an accountant to help you do this.
Your business plan must never be rigid. Rather it must remain flexible. You need to be ready to adapt to your competitor activities, market trends, and changing customer spending patterns.
7. Not Keeping Financial Records
Accounting is seen by many as a daunting task, but if you spend more time with it, you are going to get better at it. An accurate and up to date financial record is going to have a positive impact on your business financial health. Also, it is going to help you do great things in the future like- getting a loan.
8. Disregard Customers
Customers are the lifeblood of any businesses. If you don’t have clients or customers, your business is going to starve and die. Many businesses fail to see that they are providing the services and products that their customers need.
Conduct a thorough market research to know the needs of your customers. Never should you assume or guess the needs of your customers.Listen very carefully to the complaints of your customers and do something to address the issue they complained to you about. Look after your existing client base as well as possible, make them feel valued – this build a positive reputation which is important if you want to stay on top.
9. Selling Your Product Below Cost Price
Many business owners think that they will get more customers when they sell their products at ridiculously cheap prices, or that if they set their price lower than their competitor’s they will attract more customers. If you do this, you may end up increasing the price of your services or products to meet your expenses. In the end, your product or services will end up being more expensive.
It is best you sell your goods and services at a price that allows you to stay in business and cover your expenses. While prices plays a primary role, other services that comes with your product, such as solid advice and recommendation, high quality product and excellent services will keep you in the game for a long time.
10. Insufficient Capital
Businesses need money in order to function. And sadly, the big banks only approved around 24.1% of small business loans. Many businesses struggle because they don’t have the resources needed to grow. They usually have trouble attaining credit and finding funds. High-end companies suffer from insufficient capital when their spending is higher than their revenue.
Get a grip on your capital situation by monitoring your cash flow. Monitor your expenses closely and make cuts if you need to.
These are not by any means the only pitfalls your business might encounter. There are other dangers that could compromise your internal structure. But the above mentioned are some of the most common issues you as a small business are likely going to encounter.
As a business owner, you need to focus your sight on the distant horizon, not on petty problems – that always seem to work themselves out. Always be on the lookout for encroaching dangers and hazards, and quickly take steps to thwart them before they cause serious damage to your business.