If you’re a small business owner, or maybe a future entrepreneur, you probably know that statistically 96% of new businesses started will close within ten years.
The reasons aren’t always bad – maybe you opted out of the market because you realized that you didn’t want to keep up this. But too often we hear the story of the small business with big dreams that, unfortunately, didn’t make it that far.
So if you own a small business, what sorts of things should you as an owner watch out for? Here’s a few tips to consider.
Too Many Expenses
Having too many expenses is a big problem for any business, but especially for a new one. Start-ups usually haven’t established a reliable cash flow, and you’re probably also devoting a lot of time to procuring new clients and not necessarily controlling expenses.
But this can snowball into a costly mistake. While you’re busy thinking about other aspects of your business, expenses, overhead costs, and inappropriate pricing may be creeping in and eating away at your profit margin. If you have a brick-and-mortar building, you may be juggling various insurance and utility bills or overallocated overhead expenditures. And both of these can be exacerbated by low-ball prices that aren’t reflecting current market value.
Setting aside time to go regularly through and evaluate business expenses can be costly time-wise, but in the long run it’s a necessary practice.
Waste can also be a subtle area that builds up easily and, well, wastes your money. It could be extra expenses you need to cut, overworked personnel that have lost their productivity, or trouble managing your supply chain. Waste can come from (and hide) in multiple facets of your business, making it hard to spot.
Kaizen events can uncover where the waste in your business is and how to eliminate it. A Kaizen event is traditionally a brainstorming session of experienced small business owners, employees, and managers. Kaizen events are typically put on as a one-time special event, but they can also be part of a program.
Lack of Market Awareness
You can have a fabulous product or a wonderful idea for the world, but it won’t make any difference if you don’t know your market.
Knowing your market is a complex and often-evolving task. You may have had a great handle on your target audience when you first started, but maybe you’ve been so consumed in administration tasks that you’ve fallen behind on market trends. As a result, your sales take a dip.
In short, failure to understand your market may cost you your business in the long term if you as an owner aren’t devoting enough time to marketing and audience research.
There’s no doubt that owning a small business can be an intimidating venture, and every entrepreneur has to come to terms with the grim statistical failure rate. But you have an opportunity to learn from failure too, and to move forward with successful strategies.
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