Hundreds of thousands of businesses are created every year in the United States. About 20% of these will fail before hitting their one-year anniversary mark, according to the Chamber of Commerce. Additionally, 8% of all small businesses in the United States close each year, based on the U.S. Census Bureau reports.
Survival Rates of Small Businesses
Starting your own business is tough. In the beginning of your entrepreneur endeavor, you may face challenges dealing with finances, marketing, product development, organization, and many more. The reality of it all is that these challenges may not subside and new ones may even arise.
Afterall, these are the facts surrounding the survival rate of small businesses in America, according to the U.S Small Business Administration Office of Advocacy:
- Around 68% of small businesses will survive for at least 2 years.
- Roughly 49% of small businesses will survive for 5 years.
- Nearly 34% of small businesses will survive for 10 years.
- About 25% of small businesses will survive 15 years.
These statistics can be discouraging. You may look at them as if failing is inevitable. The good news is that it’s not. You can have a long running business that not only stays afloat but grows. Grows in size, grows in profits, grows its services or product lines, etc.
The Secret to Success for Small Business Owners
I wish I had a simple secret tip that’s super easy to follow but I don’t. No one does. Instead, the secret to small business success lies within a lot of things. Additionally, the key to success isn’t one size fits all. Nonetheless, there is a consensus of particular guidelines to follow.
For starters, you need a solid business plan. It then would be wise to gather the funds to start your business. Set business and financial goals. Organize your operation. The list goes on. You basically need to thoroughly plan the what, where, and how of your business. You may also want to consider what could go wrong. For the “what ifs”, have backup plans to redirect your business.
Take your time with this. Ask your friends and family what they think of your plan. It can be very beneficial getting another’s perspective. They may see flaws that you overlooked or ask questions that you never thought about. It can even help you avoid common mistakes small business owners make that often leads to business closures. And it can also mean great reviews for your business down the line.
10 Common Mistakes that Result in Small Business Failure
Knowing the common mistakes that lead to a small business failing and ultimately closing up shop can give you a step up on running your small business.
- Lack of Funding: This is the #1 reason why small businesses fail. Over half of small business owners admit this as their downfall as reported by the Chamber of Commerce. They either have trouble finding the money, such as their personal finances or applying for loans, or they have trouble balancing the profit to expense ratio.
- Mismanagement of Funds: While you may have a sufficient amount of capital to keep your business running, if you don’t allocate it appropriately, things can go south. Slow down and analyze your metrics. This can help you decide where the best place is to invest money into your business so that it will grow, not plateau or sink.
- Dysfunctional Team: According to an infographic published on Visual Capitalist, 23% of small business owners claim their business failed because they didn’t have the right team. Whether their employees were irresponsible, uneducated, unmotivated, untrustworthy, inexperienced, we are not sure. Nonetheless, it’s an eyeopener to ensure you have solid team players.
- Inadequate Management: Proper management is a key ingredient to running your business successfully. Making the right decisions at the right times is a part of this but also knowing how to manage a team. As a boss, you set the standard.
- No Clear Niche: This is often a huge mistake from the get-go. If you don’t have a clear target audience, how are you possibly going to know how to market your business? How will your audience know your service or product is for them? Find a clear niche by narrowing your ideal customer down to age, interests, income, and more!
- Marketing Neglect: Like management, marketing is a big component in running a successful business. Look at marketing as the gasoline to your business. You have all the parts necessary for your business to work but it won’t succeed without a great website design, blog posts, and advertising. How do you get clients or customers? Through a properly planned marketing strategy.
- Inconsistency: Having a plan and being organized can help you stay consistent. Consistency also helps build your business’ reputation and brand awareness. Make note that staying consistent is one of the most important things to do with your marketing strategy.
- Unawareness: In other words, do your research! Know who your competitors are. Stay on top of trends. Stay educated about your industry. Even national and global issues can impact your business.
- Poor Communication: This pertains mostly to your clients or customers but it can include your employees as well. The way you speak, your comprehension, your tone, your timeliness, etc. all are important when it comes to business communication. Be up front with what you stand for and have a clear information online about your business.
- Not Adjusting: Whether it’s positive, negative, big or small, there will certainly be adjustments that you’ll need to make throughout your business venture. You can determine if adjustments are needed in certain areas of your business by tracking your metrics quarterly.
Avoiding these business mistakes and succeeding begins with preparation. Your business idea may have sprung about overnight but planning out the fundamentals will take some time.
Starting your own business and adventuring into the entrepreneurship world is exciting and you’re probably anxious to get started. However, if you don’t do your due diligence you’re entering a pursuit with greater risk. Additionally, if your business fails – especially rather quickly – it’ll be a bigger disappointment that’ll be hard to overcome and get back on your feet to try again. Even so, if you fall, you always have the opportunity to get back up and try again.