5 Reasons Small Businesses Fail (and How to Avoid These Pitfalls)
The harsh reality is many small businesses fail within the first couple of years. Just as no one sets out to make a bad movie, no one dreams of being a failed business owner.
The good news is there are many ways to make a small business successful! This post gives details regarding five ways you can work towards long-term business success.
1. Ask for Feedback From Your Customers
Don’t let your ego stop you from listening to and implementing feedback suggestions from your customers – without them you have no business.
Don’t be afraid to ask your customers what their experience in your store, restaurant or practice was like, read through your online reviews, ask your front-line employees what customers are saying.
Ignorance is not bliss, you want to give your customers the experience they want and deserve.
2. Review Your Pricing Strategy
Are you selling more, less or about what you expected for each product you offer?
If you are selling less, keep in mind that some customers are not willing to pay more for slight differences between a premium product and a generic version of it. Research competing products and find out how well they are selling and how profitable they are. Then review your own strategy and make adjustments if necessary.
3. Learn From Your Mistakes
If a vendor consistently delivers broken or stale products, find a new one. If you are offering a lunch special on Mondays but it’s not bringing in extra customers, change the offering. If your customers complain about your prices being too high, consider a change in pricing strategy. If you have high employee turnover rates, figure out why your employees keep leaving.
Also keep in mind that over-expansion can kill a good business due to a sudden lack of resources and focus. If things are going really well, expand as slowly as you need to while ensuring your products and customer service remain at a high level.
4. Hire the Right People
Your cousin may be the best chili maker in the county, but if own an ice cream parlor, he or she may not be able to help. You are better off hiring qualified professionals who can help you deliver quality products and services to your customers right away.
Also keep in mind that personal ties can quickly become binds under stressful circumstances. You may have groomed a relative to take over the family business, but in reality they may not be qualified. Do not be afraid to say no to family.
5. Know Your Funding Options
The final way most businesses fail is by not knowing their financial options.
Your storefront may be in need of renovations to increase your revenue. Or perhaps your restaurant or shop is seasonal and you need cash to bridge the gap until your next season.
Many business owners think a loan from their current bank or a merchant cash advance are the only options. This is not the case at all!
While banks are the traditional choice for lending money they often will not finance a seasonal dip in cash flow and their approval process for expansion can take months. A merchant cash advance can be approved quickly but cash advances aren’t regulated by the government and their APRs can reach predatory rates.
In many cases the best option for small business owners is to take out a Working Capital Loan, which is a real business bank loan, but can be approved within days when obtained through ARF Financial.
Through the years we have built relationships with banks that are willing to fund working capital loans for our clients quickly. Bad credit is not an obstacle and collateral is not a requirement for loans under $725,000. Paperwork is kept to a minimum and the interest on the loan is tax deductible.