As of 2020, there are over 30 million small businesses in the United States alone. About 70% of those businesses fail within the first 5 years, 70%! Thats just a crazy high number. In this post I want to try and identify why these businesses fail and only a few survive and thrive into the future.
Are You Planning or Shooting in the Dark?
If you have read the Gospels in the Bible, you will remember when Jesus spoke saying that no man would build a house on sand less it be torn down due to its weak foundation, and in part the wise build on rock for its solid foundation. When first starting a business it’s extremely important you build on a solid well thought out foundation. What does this mean? It means that you start by doing research into your market. Is there enough people who want what you are selling, whether it be a product or service or both? How much competition is there. If there is competition, what are those competitors doing right. Always remember that success leaves clues. I’m not saying to ripoff your competition, but to model their success traits to apply to your own business. Before you invest into your business idea it’s smart to create a business plan, which you can get help with through the SBA Website.
Counting Your Costs
This might be the most overlooked aspect that gets small business owners in trouble. It does not matter at all how much gross income you take in if your expenses to run the operation out weighs your income. Sounds very basic right? Well, it is but there are still many people who over look this. For example if you are starting a drop shipping company and you are making a ton of sales but your advertising expenses are eating away all your profit, then you are not making any money, you are simply robbing Peter to pay Paul.
Your customers or clients are by far the best form of advertising you could ever have. No bill board or online ad could ever compete with good word of mouth referrals. Why is this? It’s because people trust other people they already know, they don’t trust another ad. I’m not saying advertising does not work because it does work extremely well. Take a moment to think about a local business in your city which is successful. They most likely advertise, but more importantly they have a lot of happy customers that recommend their product or service to others which brings organic traffic or “free traffic” in the doors. This is the key because when you don’t have to only rely on advertising to get new business, your profit margins go way up. The video below also give some great advice for growing your small business.