10 Reasons Why Your Small Business Will Fail - and How To Avoid These Tragic Mistakes
Summary
TLDRIn this video, the speaker discusses why small businesses fail and provides valuable insights for business owners and freelancers. Key reasons include cash flow problems, over-romanticizing the business, not understanding customer needs, inadequate competition analysis, and lack of marketing strategy. The video emphasizes the importance of building a strong brand, staying innovative, fostering a positive company culture, and valuing customer service. The speaker also highlights the significance of having a solid marketing plan and recognizing the need for expert advice. By addressing these issues, small businesses can increase their chances of success.
Takeaways
- 💰 The leading cause of small business failure is cash flow issues, often due to insufficient capital to sustain early growth.
- 🌟 Over-romanticizing the business can lead to poor decision-making; successful businesses are run on facts, metrics, and processes, not just passion.
- 🤔 Understanding the customer's problem is crucial; a business must offer a solution that people are willing to pay for.
- 🔍 Failing to analyze the competition can leave a business without a clear differentiation strategy, which is essential in a crowded market.
- 🏆 A great product alone is not enough; visibility, authority, marketing strategy, and customer experience are also vital for success.
- 🛠️ Building a brand involves strategic processes and intentionality; a registered company is not the same as a well-defined brand.
- 🔄 Resistance to change and innovation can lead to business failure; adaptability is key in a rapidly evolving market.
- 👥 A strong company culture can significantly impact a business's success, while a toxic culture can be detrimental.
- 📢 Word of mouth and customer experience are powerful marketing tools; excellent service can lead to exponential growth.
- 📈 A solid marketing plan is necessary to increase visibility, capture attention, and communicate value propositions effectively.
- 🧠 Overconfidence can be a downfall; successful business owners recognize their limitations and seek expert advice when needed.
Q & A
What is the most common reason for small business failure according to the video?
-The most common reason for small business failure is cash flow problems, which often involve not having enough capital to sustain the slow growth after launch.
Why is it a mistake to continue treating a business like a passion after it's launched?
-It's a mistake because successful businesses need to be governed and run by facts, metrics, financials, processes, and rules. Running a business based on personal emotions can lead to poor decision-making.
How important is understanding the customer's problem for a business to succeed?
-Understanding the customer's problem is crucial because successful businesses must satisfy a real need that people are willing to pay to have fulfilled.
What is the significance of analyzing the competition in the context of a new business?
-Analyzing the competition is significant because it helps to develop a differentiation strategy, ensuring that the business stands out in the competitive landscape and can attract the target customers.
Why is having a good product or service not enough for a business to succeed?
-Having a good product or service is not enough because success also requires visibility, authority, credibility, a marketing strategy, customer experience, and excellent customer service.
What is the difference between creating a company and creating a brand?
-Creating a company is about registering a legal entity, while creating a brand involves strategic processes to build a specific intention, codify and define the brand's identity, and ensure consistent experiences for customers.
Why is it dangerous for a business not to think about change or innovate?
-Not thinking about change or innovate is dangerous because history shows that companies that fail to adapt to trends and technological advancements are often outpaced by competitors and can fail.
What role does company culture play in the success or failure of a small business?
-Company culture plays a crucial role as a strong culture can propel a business to success, while a toxic culture can quickly lead to failure. A positive culture encourages teamwork, loyalty, and high performance.
Why is word of mouth and customer experience considered the most underrated competency for businesses today?
-Word of mouth and customer experience are considered underrated because every customer interaction can create significant growth opportunities or harm the business's reputation, especially with the power of the internet to amplify these experiences.
What is the importance of having a real marketing plan for a small business?
-A real marketing plan is important because it strategically outlines how the business will become visible, capture attention, communicate its value proposition, and entice customers to engage with the business.
Why do small business owners who think they know it all often fail at higher rates?
-Owners who think they know it all often fail because they may overlook the need for expertise in areas such as marketing, finance, and customer service. Successful owners recognize their gaps in knowledge and hire or retain experts to fill those roles.
Outlines
📉 Small Business Failures: Common Pitfalls
The first paragraph discusses the harsh reality of small business failures, with 22% failing in the first year and 50% within five years. The primary reason cited is cash flow issues, but other factors include romanticizing the business, failing to understand customer needs, not analyzing competition, and underestimating the importance of a strong product or service. The paragraph emphasizes the necessity of differentiation, clear communication of solutions, and the multifaceted requirements for business success, including visibility, authority, marketing strategy, customer experience, and creating a brand.
🔄 Innovation and Adaptation: Keys to Business Survival
The second paragraph highlights the importance of change and innovation for business survival. It points out companies like Blockbuster, Nokia, Xerox, Sony, and Kodak that failed to adapt and were outpaced by competitors. The paragraph stresses the significance of a strong company culture, as demonstrated by Zappos, and the necessity of customer service and experience in today's digital age. It also underscores the importance of word-of-mouth and the speed and human touch in customer service, which can significantly impact a business's reputation and growth.
📈 Strategic Planning for Business Success
The final paragraph focuses on the importance of strategic planning in business. It outlines the necessity of a marketing plan, the value of customer service as an underrated competency, and the importance of recognizing when to seek external expertise. The paragraph warns against the pitfalls of overconfidence and the failure to delegate or hire experts in various fields. It concludes with an encouragement to stay open to learning and adapting, offering consulting services for brand building and business growth.
Mindmap
Keywords
💡Small Business
💡Cash Flow
💡Passion
💡Customer's Problem
💡Competition Analysis
💡Brand
💡Innovation
💡Company Culture
💡Word of Mouth
💡Marketing Plan
💡Expertise
Highlights
22 percent of business startups fail in the first year and 50 percent within the first five years.
The number one reason for small business failure is cash flow problems.
Over-romanticizing your business can lead to treating it as a passion rather than a business governed by facts and metrics.
Understanding the customer's problem is crucial for a successful business.
Analyzing the competition is essential for developing a differentiation strategy.
A good product or service alone is not enough; visibility, authority, marketing strategy, and customer experience are also required.
Creating a brand involves strategic processes and methodologies, not just registering a company.
Innovation is key; companies that don't adapt to change often fail.
Developing a strong company culture can be the difference between success and failure.
Word of mouth and customer experience are the most underrated competencies in today's market.
Customer service creates geometric growth possibilities and can significantly impact a company's reputation.
The speed and human touch of customer service are crucial differentiators in a digital world.
Having a real marketing plan is vital for visibility and capturing attention in the market.
Owners who think they know it all are more likely to fail; hiring experts is crucial for success.
Small businesses can leverage their size to provide a more personal and human touch in customer interactions.
Maintaining a vibrant and successful small business requires open learning, growing, and adjusting.
Consultants can provide expertise at a fraction of the cost of full-time employees.
Transcripts
hey everybody welcome back let's talk
about small businesses in particular why
they fail now if you're a small business
owner you got to listen to this stuff
and if you're an agency or a freelancer
who works with small business
knowing this stuff will really help you
service your clients better so let's get
started starting a business of your own
is the dream of millions around the
world but the facts can be really harsh
in fact 22 percent of business startups
fail in the first year and 50 percent of
new businesses fail within the first
five years now the number one reason
really behind small business failure is
cash flow problems usually not having
enough capital to sustain the slow
growth that comes right after launch but
there are a number of other reasons
besides financial ones why small
businesses fail now i want you to stay
tuned because at the end of this video
i'm going to share the one most
underrated but necessary competency in
business in today's market environment
number one you over romanticize your
business
your passion can launch a business yes
but the mistake many business owners
make as they continue to treat it like a
passion after it's launched i'm sure
you've heard people say it's not
personal it's just business usually
that's used to deliver some sort of bad
news like a layoff but in a way it's
totally true successful businesses have
to be governed and run by facts metrics
financials processes and rules of course
you can and should care about your
business but you just got to make sure
that you don't run it based on personal
emotions now the second reason most
small businesses fail is that they don't
understand the customer's problem
successful businesses have to satisfy a
real need a need that people will
actually pay to have fulfilled
now you may have an idea you may love
your product you may love your service
but if that product or service doesn't
fix a specific problem your business
will fail and not only does it have to
fix that problem but you have to be able
to really communicate and articulate
clearly what that solution is and you
have to be able to do it in a really
motivating way so your target customer
will take action number three is that
you don't analyze the competition
developing a business plan either a
minimal very high level plan like a
business model canvas or a full-on
market analysis is critical to launching
a business successfully you have to be
sure there's a valid market need before
you try to start selling something you
need to do an analysis of the
competition so you can develop what's
called a differentiation strategy you
might have heard the expression
different is better than better well
it's true you aren't going to do
business in a silo there are a lot of
other people in your space out there
trying to compete for the same customer
that you are you have to intentionally
define how you're going to stand out
from all the others in the competitive
landscape who do what you do here's a
great example geico geico's in the car
insurance business are really boring
commodity space but in that boring space
they don't show up like a financial
institution they have super quirky
advertising they have characters they
have the gecko they have very funny ads
they super stand out from the
competition
in their market
number four is you think a good product
or service is enough having a great
product is not enough to succeed it
takes so much more here are just a few
more things that it takes takes
visibility so you have to be able to
establish a presence a brand awareness
of your existence it takes authority so
establishing reasons to believe that you
can deliver what you say you can deliver
you also have to establish credibility
that is proof testimonials case studies
that you can deliver what you can and
that you can do it for other people it
takes marketing strategy so promotion
and attraction so ads and possibly
content marketing and don't forget word
of mouth and i'll share a little bit
more about that later it takes customer
experience or cx you have to pay a lot
of attention to the purchase experience
that your customers have and you also
have to deliver incredible customer
service before during and also after and
more on that later as well number five
is you didn't create a brand you created
a company
anyone can register an llc but a company
is not a brand a two brand is created
with a specific intention to build a
brand you have to undertake a series of
very strategic processes there are
agencies like mine that can guide you
through those steps there are specific
methodologies that are used to codify
and define a brand so from the very
start everyone is following the same set
of rules in everything they do
everything they produce and say you
might have heard the saying if you don't
create your brand your customers will
create it for you and it's really true
yes the aggregation of your customers
experiences will over time define what
your brand is but if you don't actually
in the beginning architect those
experiences with really specific
intentions every step of the way you're
leaving so much of this up to chance
number six is you don't think you have
to change or innovate
history is littered with companies that
didn't want to change blockbuster for
instance didn't see the trend in
streaming media or the opportunity to
deliver dvds by mail netflix did and
they totally ate their lunch nokia
didn't see the value in touch screens
xerox they invented the pc and didn't do
anything with it and then they actually
showed it to steve jobs at the xerox
park and he took that concept and
birthed apple right out of it sony
invented the walkman they totally owned
the mobile music market but then they
ignored the move to digital music files
remember culture doesn't stand still
even right now environmental concerns
and market demand are moving the auto
industry deeply and quickly into
electric vehicles technology also
doesn't stand still kodak didn't
recognize the move to digital and
thought film would always be preferred
and look where they are now number seven
is inside the business is as important
as outside the business developing a
strong company culture can mean the
difference between success and the
failure of a small business and toxic
cultures can kill a business really
quickly but a great company culture can
propel a business to success just as
quickly look at zappos they were in a
commodity space shoes they went from
nothing to being acquired by amazon for
1.2 billion dollars in 10 years largely
on their culture and their customer
service remember business is a team
sport successful businesses must develop
the ability to train delegate and trust
their employees and the inability to
encourage loyalty by compensating your
employees fairly and recognizing and
rewarding performance and not just
punishing mistakes is a must have for
small business number eight is
underestimating word of mouth and
customer experience now at the beginning
of the video i said i was going to share
with you the one most underrated
necessary competency for companies in
the market today this is it customer
service every customer interaction
creates geometric growth possibilities
for your company the internet has
created platforms that are essentially
massive soap boxes where virtually
anyone can publicly call out or shame a
company for inferior products or bad
service one fantastic customer
experience has the potential for a brand
to blow up in a really great way and one
bad experience can blow you up in a
really bad way
today also the speed of customer service
is more important than ever and also
human touch is a huge differentiator for
businesses in a world full of chat bots
and endless phone trees and offshoring
and this is also a really great
advantage for small business because
being small you can really accentuate
the idea of human touch in how you
interact with your customers the ninth
reason most small businesses fail is
that they don't have a real marketing
plan having a great product or is only
step one you have to strategically plan
how you're going to become visible
where when how frequently you're going
to show up
how are you going to capture attention
in the market how are you going to
communicate your value proposition and
then how are you going to entice people
and then transport them to where you
actually deliver the thing whether
that's a digital portal like a website
or an e-commerce store or a physical
retail outlet and the 10th reason small
businesses fail is they have an owner
who thinks they know it all having
confidence is really necessary to
starting and running a business but
owners who think they can do it all and
that they know it all fail at much
higher rates those who know what they
don't know
and hire or retain experts in things
like marketing and consumer research
finance sales design customer service
are much more likely to succeed even if
you can't afford to hire full-time
employees you can retain consultants to
get you up to speed at a fraction of the
cost and you can do it without taking on
continuing salary overhead or benefit
costs i've experienced exactly that in
my own business and working with dozens
of clients with my agency verhal brand
design
starting and maintaining a vibrant and
successful small business is one of the
most rewarding experiences you can have
in your working life it gives you a
sense of agency and control over your
own destiny if you go into it with your
eyes wide open and stay open learning
and growing and adjusting as you go
along your small business can succeed
just heed these 10 watch outs and you'll
be on your way so that's it i hope you
like this video and 10 reasons why small
businesses fail and if you did like it
make sure to hit that subscribe button
and bang that notifications bell and if
you need help with some consulting or
brand building for your own small
business reach out to me at
philippvandusand.com and let's get you
to the next level and with that thanks
again for watching and bye for now
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