It’s well known that the failure rate of small businesses is extremely high. Entrepreneur.com rates people’s chances of surviving in business beyond 5 years at 50/50, while the chances of failure after 10 years are 70%.
I wanted to explore this to find out what people attribute this low success rate to, and to compile my own list of the 13 issues businesses could focus on to avoid failure and thrive.
With that in mind, here are the top 13 reasons why businesses are less successful than they might otherwise be. Focus on these to increase your chances of achieving substantial success:
1. Not knowing what you don’t know
Not knowing what you don’t know can blindside you and differs for all of us based on our worldly experiences. A typical one that has dramatic consequences for some business owners is a failure to take on board an important intellectual property issue. Trademark disputes often arise for those who are unaware of IP, with a consequent need to rebrand. Not understanding the role of Brand Names in Business led to China Tang having to rebrand even though they had been using the name for 12 years. Compumark an industry leader in trademark research and protection reported in 2020 that trademark infringement is rising year on year with 85% of brands experiencing trademark infringement in the previous year, showing a steady upward trend from 81% in 2018 and 74% in 2017. To avoid IP disasters get a professional opinion on the name you intend to use in business, and consult an IP lawyer to find out if there are any steps you need to take to protect your business idea or to ensure your project doesn’t suffer from an IP oversight.
2. No commitment to learning
Successful business owners are constantly looking to learn. Achieving greater impact comes from being open to new ideas. Read, listen to podcasts and audio books, take courses such as Brand Tuned to discover better ways to design your business, get clients, and serve your existing ones. Business is hard. There are many skills you need to develop – problem solving, people management, emotional intelligence, negotiation, and creativity being just a few. Committing yourself to learning, is the way to be aware of the latest trends, innovate, and implement new processes to increase the effectiveness of your operations, and achieve greater success
3. Not understanding marketing
Many people mistakenly assume marketing is all about advertising and promotional activities. So, they don’t focus time and attention to work out what their unique value proposition is before pouring money into marketing campaigns. There’s no point outlining the steps you intend to take to sell your product or service if you haven’t first identified your niche and target audience.
Once you have done the necessary preliminary work, have a marketing plan and execute your campaigns well because lack of sufficient marketing and publicity could lead to business failure.
4. Failing to plan properly
As the saying goes, failing to plan is planning to fail. If you don’t know where you are going, you will never get there. Having a comprehensive and actionable strategy is an essential component of planning. A strategic plan should provide a clear roadmap, so you know where you are now and where you’re hoping to get to. The strategy needs to address your niche and target market, your marketing plan, as well as other important issues like financial projections, staffing, and the features of your products or services. It needs to explain how you will go from where you are today to where you want to ultimately get to.
5. Lack of vision
Without a clear vision, you won’t know where you are going and will waste a lot of time, money, and energy trying to find the right path. Traditionally, when developing your business strategy, you need to clarify your purpose for being in business, beyond making money. This isn’t about how you are going to do good deeds. It needs to be relevant to the business you’re in. For example, Amazon’s purpose is to be earth’s most customer-centric company, while Apple’s is to make tools for the mind that advance humankind and Coca Cola’s is to refresh the world. Your overall purpose (or call it brand belief, if you prefer), focuses on what you want to improve in the world. My purpose is to foster greater business success. Your purpose doesn’t need to be unique. It can be shared with many other businesses whether they operate in the same field or in an entirely different one. For example, like Amazon, you may want to be the most customer centric company in your industry. The purpose determines what your brand values need to be. Think of your vision in terms of what you want to do in your industry to improve the status quo. What’s missing that you want to introduce? Your vision helps keep you on track. So, my vision is to change the way brands are created. Your mission is the other side of the coin. It’s about how you’re going to bring about that change through the products and services you offer, or the way you do business. So, my mission involves creating the Brand Tuned program to educate brand professionals to create brands by thinking strategically about IP. While your purpose might be the same as countless other businesses, your vision is likely to be essentially unique in some respects. It serves as a roadmap to help you see where you are today in relation to where you want to ultimately be.
6. Lack of innovation
To succeed in a sustainable way over the years and decades ahead you need to innovate. That is, find ways to create something more, or better than what currently exists, so it adds more value than anybody else in the game. And that comes from constantly innovating in a way that’s profitable and customers care enough about to be willing to pay for.
7. Not understanding your market and customers.
Ask yourself: Who is my customer? Understanding what customers want, need and are buying is crucially important. Answering questions about what problems customers have that you are well placed to solve for them, and how much they’re willing to spend is essential before spending money on product development or marketing campaigns.
Discovering your true value as a business involves understanding your competitive marketspace. Ask yourself core questions like: What does the marketplace need? What can you do to generate word of mouth? Can you offer something radically different? “What business are you really in?” Once you understand it, you need to communicate effectively so your target audience connects to your offerings.
8. Failure to niche
One of the most misunderstood subjects is the importance of having a defined niche. People try to make their business attractive to everyone, listing all the services they can offer, and don’t realise they will end up being attractive to no one as a result.
Trying to go after all the business you can get is a classic mistake. Having a niche doesn’t mean you only do one type of work. It’s about choosing what you want to be known for. While you may well be able to provide more than just that one service, if you’re not known for a niche you’re less likely to attract customers. Every business starts out with a niche. For example, Facebook began by focusing on students at Harvard before gradually extending its reach to other universities and the social media platform it’s become today. Think of your business as expanding niche by niche. Failing to focus makes it more time consuming and difficult to achieve sales and to deliver a quality service.
Narrowing your focus by clearly defining your value proposition improves your odds of reaching the people you want to serve. Market yourself as an expert in a specialty and address those who can benefit most from your services.
9. Not knowing how to make sales
Winning customers over starts with understanding consumer desires and tailoring products to meet those wants and needs. You need to find effective ways to generate leads and to convert those leads into customers. That means learning about sales.
10. Relying on one customer
If your biggest customer walked out the door and never returned, would your organization survive? The answer is likely to be no for most businesses. Diversifying your customer base should be a strategic objective in your business plan.
11. Lack of capital
Businesses need cash flow to float them through the sales cycles and the natural ebb and flow of business. Cash is king, and many quickly find that borrowing money from lenders can be difficult.
12. Poor management
Management of a business encompasses several activities: planning, organizing, controlling, directing and communicating. A common problem faced by successful companies is growing beyond management resources or skills.
13. A poor mindset
One of Tony Robbins’ central philosophies is that our mindsets create our realities; what we believe influences what we are able to achieve. As entrepreneurs, when we embrace strategies for turning business failure into success, we transform our mindset from one of defeat into one ofempowerment. And when we are empowered, a failing business is not the concluding chapter in our story; it is only the beginning. Don’t let your limiting beliefs disempower you. Instead, stay hungry in your search for success. Your hunger will inspire you and pay off in the end.
In conclusion, given that there are many facets to business success, it’s not surprising that so few businesses succeed enough to remain viable in the long run. So, what should new founders do to ensure their success? I’d say test the market, fail in small ways, learn, iterate and improve. There is no such thing as overnight success so be in it for the long haul.