The most common reasons small businesses fail—and how you can avoid them so your business not only survives, but thrives.
You want your business to succeed. In fact, you want your small business to do more than succeed—you want it to thrive. And it absolutely can! But when googling the stats on how many small businesses fail in the first year—or five years—the results can be discouraging.
So how can small businesses set themselves up for success and thrive in the long term? The key is to avoid all-too-common entrepreneurial pitfalls.
Let’s take a look at the seven business mistakes to avoid if you want your small business to succeed. Knowing why small businesses fail will help you on your path to entrepreneurial success.
Mistake #1: Building a Business Around What You Want—Not What Your Customers Want
You might think you have the world’s most amazing business idea—but if your business doesn’t fill a need or want for your customer base, it’s not going to take flight.
Before you spend the time, energy and resources necessary to build a business, you want to make sure your business is centered around something that your customers want or need. But many new entrepreneurs skip this step. They jump right into the business plan process without testing their idea—only to see their small businesses fail spectacularly.
If you’re thinking about launching a business, it’s important to test your idea and the market before you invest any further. There are a variety of ways you can gauge whether your business idea will land with your customers, including:
- Competitor research: You never want to rip off the competition or steal someone else’s idea. But seeing what other small businesses are doing in your space will help give you insights into what customers are looking for—and whether your business idea aligns with those wants/needs.
- Quora: Quora is a platform where people go to ask questions and get answers. Digging around Quora to see what questions people are asking about your industry, niche or product idea can be a great way to gauge what’s going on in the market.
- Customer research: You want to build a business that connects with your ideal customers. So why not go directly to the source to find out what, exactly, they want? Talk to your customers. Send out surveys. Run focus groups. The better you know your customers, the more you can tailor your product or service to provide solutions to their problems. And the better your business will perform as a result.
You might think you have a great business idea—but you won’t know until you test that idea. Before you funnel all your resources into launching a small business, do your research to ensure your business is built around something your customers need or want.
Mistake #2: Trying to Wear All the Hats
As a small business owner, you’re going to wear a lot of hats. But if you try to wear all the hats, eventually, it’s going to weigh you down.
One of the biggest (and most exhausting!) mistakes small business owners make is trying to do everything themselves. They’re the CEO, the accounting manager, the administrative assistant, the salesperson—the list goes on. Whenever something needs to get done, they’re the ones to roll up their sleeves and do it.
But the truth is, trying to do everything yourself is not only unsustainable (hello, burnout!), but it’s also detrimental to your business. No matter how talented or business savvy you are, there are going to be things that need to get done that just aren’t in your wheelhouse.
If you want your business to succeed, you can’t do everything yourself. The best course of action? Hiring the right team and delegating or outsourcing tasks to qualified people with the right expertise. They can help you manage the areas of your business that you don’t enjoy, aren’t good at or aren’t as urgent.
This leaves you to focus on the parts of your business that you actually love and matter most. Moral of the story? If you want your business to be sustainable in the long-term, you need to take off some of those hats, find the right support and delegate.
Mistake #3: Refusing to Leverage Technology
As mentioned, not delegating tasks in your business is a big mistake. But delegating to other people isn’t your only option.
There are technologies out there that can make a huge variety of tasks in your business faster, easier and more effective. But there are also plenty of businesses out there (typically the “wear all the hats” ones), whose owners refuse to leverage those technologies. And those small businesses seriously suffer as a result.
Leveraging technology in your business is a must if you want to get things done, maximize the impact of your business and stay competitive. For example, let’s say you’re a business owner launching a new product or service line. If you don’t leverage the variety of e-commerce tools on the market and allow your customers to shop online, you’re going to be limited in your reach. Not to mention, you’ll lose out on a huge audience of potential customers. And those customers will go straight to competitors who offer online shopping options.
Or let’s say you’re trying to manage your invoicing and payment process manually. This is going to monopolize a huge amount of your time. Plus, your more impatient customers might not want to deal with the process of sending in payments. Instead, they’ll look for a company that offers more convenient online payment options.
But when using cloud accounting software, you can take care of all your invoicing with a few clicks, and offer easy-to-set-up payment options that benefit you and your clients.
Technology can make just about every process in your business faster, easier and more efficient. If you want your business to succeed, you need to take advantage of those technologies.
Mistake #4: Being Too ‘Big Picture’ or Too ‘in the Weeds’
To build a successful business, you need to have both a big-picture mindset, and a “roll up your sleeves and get it done” mentality. But leaning too much toward either side can lead to trouble for your business.
If you’re too caught up in big-picture thinking, it’s hard to get anything done on a day-to-day basis. The opposite is true if you’re too in the weeds of the day-to-day tasks of running your business. You’re not going to put enough thought and effort into the long-term vision of your company.
Striking a balance between both is a must if you want your business to succeed. First, it’s important to figure out which direction you lean toward. Do you find yourself spending a lot of time creating a business plan to take things to the next level? Or are you spending all of your time answering emails, processing orders and managing all the other mundane tasks necessary to keep your business moving forward?
Once you know which mentality you tend to lean toward, you can develop a strategy to find more balance. For example, if you’re more of the “let’s tackle what needs to get done today” type, you might block off time in your calendar every afternoon for business strategy. Or, if you’re more of a big-picture thinker, you can hire an assistant to help you get things done day-to-day—so that you stay on task and check items off your business to-do list.
Having a big-picture mentality is a must for entrepreneurs—and so is having the grit and drive to roll up your sleeves and get things done on a day-to-day basis. If you want your small business to succeed, it’s important to find a balance between both.
Mistake #5: Not Having a Handle on Your Finances
Ultimately, the goal of your business is to drive a profit. But if you don’t take control of your finances from the beginning, it’s going to be really hard to get there.
Disorganized finances will cause your business to run into a host of problems, including:
- Miscalculating monthly cash flow
- Paying too much for services
- Making costly mistakes when tax time rolls around
That’s why it’s so important to implement financial systems from day one. When you organize your finances from the beginning, you’ll have a clearer picture of your financial situation as you grow—which will make managing your business significantly easier.
If you need help getting your finances in order, cloud accounting software is a great way to get organized. Not only do these tools allow you to send invoices and manage customer payments, but they also help you monitor your cash flow and business health.
Mistake #6: Getting Stuck in Your Ways
Your customers are constantly changing and evolving—and if you want your business to thrive, you need to change and evolve right along with them.
But there are a ton of entrepreneurs out there who refuse to change. They get stuck in their ways and refuse to pivot their business strategy. Even when things aren’t working or when they’re no longer connecting with their customers. As a result, their small businesses get left behind.
Change is constant. Your customers and industry are going to change, and so will your business goals. And if you want your business to succeed—not just today, but for years to come—you need to be flexible and willing to adapt.
The more adaptable you are, the more you can change to fit your customers’ changing needs—and the more long-term success your business will have as a result.
Mistake #7: Trying to Do Too Much, Too Fast
It might sound counterintuitive, but one of the biggest mistakes small businesses make? Trying to be too successful, too fast.
There’s nothing wrong with wanting to scale your business. But trying to scale too quickly can backfire and have a negative impact on your long-term success.
For example, let’s say you just launched an e-commerce business. You might be tempted to scale up immediately and drive tons of traffic to your shop. But, if you don’t have the systems in place to fulfill a high volume of orders, you’re not going to be able to keep up with the demand. And when your customers don’t get their products quickly and efficiently, it could deter them from shopping with you again.
When it comes to building a business, remember: It’s not a race to the finish line. Taking a “slow and steady” approach will help make sure you have everything you need to grow. Ultimately, it will set you up for success in the long-term.
Avoid These Classic Reasons Small Businesses Fail, and Thrive
Plenty of small businesses fail in the first year or two. But yours certainly doesn’t have to! By understanding the most common mistakes entrepreneurs make when building their businesses, you can avoid business failure on your entrepreneurial journey. Not to mention creating long-lasting success for your small business in the process.