Why do businesses fail?
According to the Australian Bureau of Statistics, more than 60 percent of small businesses cease operating within the first three years of starting. It’s a frightening number, and one that I hope will not discourage you to start with a new venture or persevere with your current business.
I would like to share with you what I’ve learned through the years of working with businesses on why they fail. In general, I find that there are 5 reasons that lead to a business’s demise, and what you can do about it.
Reason #1: They don’t know how to solve their customer’s problems because they don’t know what they need and want.
Do you know why your customers are buying your product? They come to you because they want to solve a problem or need. Harvard Business School professor Theodore Levitt famously said,
“People don’t want to buy a quarter-inch drill, they want a quarter-inch hole.”
Your customers will continue to patronise your business for as long as your product and service solves their problems.
Take every opportunity you get to talk to your customers to get to know them and their pain points. Focus on providing excellent customer service and leverage that to build genuine long-lasting relationships with your customers.
Reason #2: They don’t know how to answer the question, “Why should customers buy from you and not the competition?”
Do you know your USP?—i.e. your Unique Selling Proposition? You know your USP when you can clearly and concretely answer the question, “Why should I buy from you?”
Your USP is what differentiates you from your competition and it defines your brand, which is essentially what you promise to consistently provide to your customers.
Learn to articulate this message to your target market. Consistently provide what your brand promises. Your USP not only helps keep you on course, but it also helps your business grow.
Reason #3: Their customers don’t know how the business’s product or services can help them solve their problems.
Perhaps you know how your product can solve your customers’ problems, and you also know why your customers should buy from you. But do your customers know this? Do you communicate this properly to your customers?
Some businesses fail not because they have subpar products, but because their customers didn’t know they had the product that they didn’t know they needed. Once you know what your customers’ needs and how to address them, learn how to integrate this into your everday communication with them. Consistently remind them that you are their to solve their problems—this will keep them coming back.
Reason #4: Business owners don’t take care of themselves.
Taking care of yourself means investing in yourself. Remember, you are one of your business’s most important assets. Update yourself with skills and trends in your industry. Leverage your strenghts. And if you feel that you are weak in certain areas, learn to delegate and leverage on the strenghts of other people working for and with you.
Most importantly, do not forget to take care of your health. Take rests. A tired mind and body is not a productive one. Even machines need to rest and reboot—and so should you.
Reason #5: They don’t know how to profitably operate their business, or even how to profitably scale it.
Do you have an idea of how to move your business from where you are today to where you want to be in say 2 year’s time? Many businesses fail because they don’t know how profitably operate and scale their business—and this is usually caused by the lack of a feasible or sustainable business plan.
Business plans aren’t as complex as one might think. If you can visualize your goal and if you can articulate the (feasible) steps you need to take to achieve your goal; and wire them down so that you can use it as a reference, then you have the first draft of a business plan.
Lastly and most importantly, do not hesitate to ask for help. Successful entrepreneurs know how to leverage not only their strengths but also the strength of the people around them—the people they work with and the people who work for them. Don’t hesitate to seek out a mentor or a business coach. Surround yourself with people who have the knowledge and expertise that will not only complement your own but also create synergy to propel your business towards profitable and sustainable growth.
If you are interested to know more about what a business has to go through when facing exponential growth, you can down load the first chapter of the book, “ $20K to $2 Million in 2 years” absolutely free here. The chapter talks about the differences between a good and a great business and puts out questions that makes you consider how you can turn your business form good to great.