Why Small Businesses Fail: Knowing is Critical to Your Success
About 20% of U.S. small businesses fail within the first year. By the end of year five, roughly 50% have stumbled and are unable to succeed.
If you make it to 10 years, you’re in a fairly small group of 30 percent of businesses that have survived. According to the U.S. Bureau of Labor Statistics, this data from business failure rates is pretty consistent.
Now that you have this information, how do you use it to get a leg up on the competition and ensure your success? Follow your strategic plan!
Forbes looked at eight reasons small businesses fail and found that the number one reason is lack of vision. A successful small business entrepreneur has a clear sense of their purpose, vision and mission.
Starting a business is like starting any journey: you need to know your why, what and how. Why are you on (or starting) your journey? What do you want to find when you arrive and how will you get there?.
Having a roadmap is essential. And that is exactly what a strategy is.
So, how do you prevent your own SMB from falling to the wayside on the entrepreneurial highway?
Have a strategic plan and revisit it
Just more than one out of 10 small and midsize businesses (SMBs) fail in their first year due to lack of preparation.
Having a business strategy that outlines your purpose, vision and mission, a budget to address your financial needs, and a business niche and target audience will give you the tools to plan a route to success.
Semrush recently offered some remarkable SMB business statistics for 2021, including the fact that 62% of small business owners still feel the worst impact from COVID-19 is still yet to come in 2021.
In this case, it is a great idea to look at your business strategy again, as what worked before the pandemic may not be what you need to do now.
Hone in on your target audience
Identifying your target audience is at the heart of a successful business strategy, especially when it comes to your online presence and other marketing efforts.
The simplest way to define a target audience is to look at the behavior and demographics of your customers (and potential customers). When you understand some basic things about your audience, you may have a better idea of how to reach these folks and turn them into customers.
Hubspot outlines some key areas to identify when defining your target audience, such as:
- Geographic location
We’ve created a target audience worksheet to help you get started identifying this important area.
Make sure your marketing foundation is solid
Finding your path to success depends greatly on understanding the strength of your marketing foundation.
But if–as an SMB owner–you find it difficult to define your message, evaluating your current marketing state can help you identify your path forward.
If you have identified your basic business strategy, you’ll still need to ask:
- What are our strengths and where can we improve?
- Where are our opportunities and what are our threats?
- What does our ecosystem of tools look like?
When you have determined where you stand and what you need to work on, it’s time to start creating your marketing roadmap. Following these simple steps will set you far ahead of the average small business owner.
Addressing the challenge of cash flow
Another big challenge small businesses face is cash flow. Creating a strategic plan doesn’t have to be expensive or expansive. Keep it simple and focus on the areas that will give your business the foundation needed to withstand potential pitfalls.
- 66% of small businesses face financial challenges, with 43% claiming the most prominent challenge is paying operating expenses.
- At the end of 2020, nine million loans were given to SMEs, totaling $750 billion.
The future looks bright for SMBs
In spite of a more volatile success rate, small businesses are the backbone of the US economy. And, when their values align with yours, customers really like purchasing products and services from SMBs that they value and trust.
Hubspot found that customers really do prefer small businesses, especially given their positive community impact and better customer service.
- In 2020, 46% of consumers said they were more likely to shop at a small business.
- 53% of people say shopping at small businesses gives back to their communities and gives them more purpose in their shopping habits.
- 91% of the time, consumers will choose small businesses when convenient, and 74% look for ways to support small businesses even if it’s not convenient.
- Consumers (77%) are willing to pay more if they receive excellent customer service from small businesses.
Setting your roadmap to success doesn’t need to take a lot of money but you should definitely devote the time necessary to developing the right strategy. If you’d like to get a snapshot of your own SMB marketing foundation, take our 10-question quiz and find out more about our redMAP process.
Having the bases covered and understanding where and how you are going to reach your goals will be one of the strongest predictors for your long-term SMB success.
Tomato Fish Is An Indianapolis Consulting Company Focused On Helping Small And Midsize Businesses Make Good Strategic Planning Decisions.