How Small Business Owners Can Prevent First-Year Business Failure
By: Vlad Moldavskiy 11/17/2014
Most U.S. businesses will fail within the first two years of starting up, according to the U.S. Bureau of Labor Statistics. Unfortunately there isn't one reason why new businesses fail, and no industry is immune to a potential downfall and missteps. But there are ways to combat the risk and help your business not only survive, but thrive. Keep your head above water the first year and beyond with these business tips:
Understand your customers’ needs
Don’t assume what your customers want and need; ask them before your competitors do it first. Mint’s now-defunct competitor Wesabe focused on building tools that could help customers change their financial behavior. Mint, meanwhile, gave its customers intuitive tools that provided all the financial data they needed. Wesabe should have taken a cue from its competitor and also made its product more user-friendly, notes blogger Marc Hedlund.
It’s not your job to choose what your customers need; it’s your job to create a product or service that meets exactly what they need. Ask your customers through an online survey, read online reviews about your competitor's product. Carefully study competitor's business model, revenues and company culture to identify what they’re doing right and what they’re doing wrong.
Don’t fall victim to the passion trap
It’s good to have passion for a product or service but you need to test the market. The book “6 Secrets to Startup Success” profiles companies that focused too much on launching a business from passion and saw their business fail. One woman profiled in the book started an adult daycare center with investments of nearly $5 million dollars.
Despite an enormous amount of passion and confidence behind the idea, the concept didn't take off and there just wasn't a need in the market. A passionate idea alone isn’t enough to pull the trigger on a business, you also need to test the waters to see if there’s enough demand in your area for what you’re selling, suggests Inc.
Being disorganized does more than cause some frustration. A survey by Express Employment Professionals showed that over half of those surveyed said they lose nine hours a week due to organization. The survey also showed disorganized employees can cost companies $11,000 a year in lost hours. Start by streamlining your project management systems with software like Base Camp, automatically backup your website with online tools like Mozy, and eliminate inbox clutter with SaneBox. Cut down on ineffective company meetings and status reports that don’t benefit your bottom line.
Failure to adapt
In 1872, Montgomery Ward was the Amazon of its day and offered mail ordered items to people in even hard-to-reach places. The company was successful for over 125 years, but didn't evolve and adapt to new trends and technology, reports Fast Company. Today’s business owners can take a cue and see what their customers really need, what the competitors offer and how to make it even better.
Your customers may want online chat customer service, a more user-friendly software interface or quick and speedy returns like Zappos 365-day return policy. The idea is to adapt readily and eagerly and meet your customers’ needs and keep pace with your competition.