According to Forbes, 80% of small businesses fail within the first 18 months. Another 50% fail within 5 years. If you don’t want to become a small business statistic, read on.
Going into business for yourself can be a double-edged sword. On one side its very fulfilling creating something from scratch and turning it into a successful thriving business. On the other side it can be very stressful and damaging to your health, family and put your life savings at risk.
What keeps you awake at night?
As you probably already know, when you first start a business you worry about cash flow. How you are going to pay your bills until you cash flow positively? You might find yourself having to do absolutely everything in the business; sales, marketing, planning, accounts, customer service, social media as well as keeping your website up to date and not enough time to get it all done. You would love to employee extra people to help, but you can’t afford it.
You probably worry about reaching your target customers and making enough sales. You worry about where your next sale is going to come from for you have no prospective customers on the immediate horizon. You might even be tempted to discount your products or services to get immediate sales on the board.
Due to the stress of being in business for yourself, your relationships at home might become strained. Your friends and family don’t understand you are serious about making your business work even if that means working all hours of night and day.
Sometimes you feel like you are drowning in your business and wondering what you should be doing next. You might feel like you are walking a tightrope between succeeding and failing. You might even question did you make the right decision to go into business in the first place.
All these feelings are normal and something every entrepreneur goes through.
Common reasons for small business failure
Let’s have a quick look at why so many small businesses fail in the first 18 months. it’s also important you keep these common reasons in mind when looking at your own business model.
The most common of course, is a lack of working capital while you are getting your business established. Unless you allow enough working capital to cover not only your business expenses, you need enough working capital to cover your personal expenses as well while you are getting your business established. If you don’t – you put your business at risk.
The second most common reason for a small business failing is poor management and a lack of leadership. Whether you work from home, an office, in retail premises or have a few or no employees, you still need to manage people alongside your business. This includes managing suppliers, customers, employees and any other stakeholders who contribute to the success of your business. This of course, is in addition to running the day to day operations including managing interruptions and distractions.
You must have profitable sales. If you don’t know how to cost your products or services correctly to cover your overheads AND make a profit, you put your business at risk.
If you don’t like selling – you better employ someone who does. Without a continuous flow of prospective customers in your sales pipeline, you put your business at risk. No customers equal no business.
Another common reason businesses fail is a lack of planning. If you fail to plan – you plan to fail. If you don’t know where you are in your business or where you are going, how do you plan to get there and how will you know when you arrive? Without a workable business plan – your business is at risk of failing.
Even as a small business entrepreneur you got all these things right, it doesn’t guarantee success because there are a few missing ingredients and that is why. Yes WHY.
I kept asking the question why some small businesses succeeded against the odds. Because of this research I developed a strategy to help you succeed.
The first of those secrets is WHY and the question I have for you is very revealing. Why did you want to be an entrepreneur? Why did you want to work for yourself? Why start your own business? The truth is, and you might not want to hear this many people start a business for the wrong reasons.
Mistake # 1
The first Mistake is you hated your job and thought it would be better and easier to work for yourself. You might have thought at least you would be your own boss. Then you found out running a business is not as easy as you thought, and you develop a new appreciation for working for someone else who takes all the risk.
The second mistake is you really hated your boss and couldn’t wait to fire them because you thought you could do better. Just because you hate the boss doesn’t necessarily give you an understanding of how to run a small business.
You may have been unemployed and couldn’t find a job so thought you would start your own business not necessarily realizing how hard being an entrepreneur is. At least with a job you get a regular pay check without the risk.
Mistake # 4
You thought it would be fun. You only want to do the things you like and not the things you don’t like. You didn’t count on having to do all the things that aren’t so much fun like filing, paying bills, finding good staff and the right suppliers.
Perhaps you were made redundant and thought the easiest thing to do is go into business for yourself and buy yourself a job by buying a franchise. Yes, you are taught a system to run the business but lack the passion.
Mistake # 6
You wanted flexibility. You could simply work from home to fit in with your family or your lifestyle. But you discovered flexibility and success come at a price.
Mistake # 7
You may have thought… here I am doing all the work and the boss gets all the money. I can’t tell you how many times I’ve heard employees say that. You wanted to be the one who got to keep 100% of the profits but didn’t consider the financial risk of going into business for yourself.
Mistake # 8
Lastly you might have thought working for yourself would be easier than working for someone else only to discover that isn’t the case.
Are any of those reasons for going into business for yourself going to keep you motivated when times are tough. If you started your business for one or more of these reasons, chances are you will become a small business statistic.
What should be the real reason to go into business
Your real reason WHY might be financial freedom to enable you to travel and put your children through college. It might be to retire in comfort and give back to society or spend quality time with your grandchildren. Another why might be to buy that dream home or ride around town in a brand-new sports car.
These are the real reasons for going into business.
Consider this. People don’t buy insurance, they buy peace of mind. Women don’t buy cosmetics, the buy wanting to feel good about themselves. Your business is simply the vehicle in which you achieve your WHY. It’s the personal benefits you receive from being in business for yourself.
Your dream, your vision, your real reason WHY must motivate you enough to jump out of bed in the morning and fight for your business when times are tough.
On a final note
In order for a business not to fail, your WHY or dream must be so powerful to ensure you are motivated to fight for your business when times are tough.
In a Nutshell
80% of small businesses fail within the first 18 months. Another 50% fail within 5 years.
Common reasons businesses fail.
- Lack of working capital.
- Poor management and a lack of leadership.
- Lack of profitable sales
- Lack of planning
The 8 biggest mistakes for going into business for yourself.
- You hate your current job.
- You hate the boss and think you can do better.
- You were unemployed.
- You think it will be fun.
- You were made redundant.
- You wanted flexibility.
- You did it for the money.
- You did it becasue you thought it would be easier.