It’s a harsh reality, but
, that brilliant small business idea you’ve been harboring has a 50/50 shot
of going down in flames. Understanding why so many small businesses fail
(and how to avoid the same fate) will help you edge the odds in your favor.
For example, enrolling in a
small business insurance
plan is an important measure against extreme financial liability in the
case of unexpected lawsuits.
Choose Your Endeavor Carefully
The first thing you need to do is be certain the business you choose is
profitable. It can be a wildly popular idea with lots of willing takers,
but if the business costs more to provide than it earns, you’re going see
negative numbers on your balance sheet. It might feel good to bring joy to
all of those people, but you’ll be heartbroken when all of your work and
cash goes with the last customer out the door. Make sure there’s a viable
market for what you’re offering.
Understand Your Market
Before you spend one dollar toward establishing your enterprise, take some
time to get to know your
target customer. Get a feel for the the market and test your ideas. The
time spent will better position you for success. Ideally, you should be
capable of defining your business objective in one sentence. You should
also be able to say who your target customer is in one sentence. Try to be
all things to all people and you’ll lose. Understanding your customer
demographic and serving them well is your best shot.
Key to your profit potential,
is the difference between a steady stream of customers and a small trickle.
It’s also be the difference between operating at a profit or at a loss.
Further, your pricing will determine to a large extent the quality of
service you’re capable of providing. If you’re trying to be the low-price
leader, you will forego being the quality leader. Pricing right also
determines your ability to maintain a solid cash flow.
Every successful business hits a point at which it is too much for the
founder(s) to keep going it alone. Hiring the right people at the right
time can be a dynamic catalyst for growth. Conversely, trying to go solo
for too long can be the kiss of death. With that said, you have to be sure
people you put into place
are capable of carrying you to new heights. Examine each position
carefully, determine what skills are needed to crush them and find people
capable of doing so.
Grow too quickly and your processes will struggle to keep up. Plan for
growth to make sure you have adequate resources to support it. Rather than
trying to saturate the market, take your time and grow into it while
keeping an eye on the competition. You want to avoid being outcompeted, but
you also want to make sure you can handle new customers competently.
Companies adhering to these five principles have the best chance of being
successful. Other strategies to implement include choosing your location
carefully, maintaining good customer service, providing adequate training,
avoiding fraud, instituting a sound business plan and seeking outside
advice when needed.
Increasingly, lawsuits have become a bane as well. Maintaining adequate
small business insurance is a must. Luckily, CoverHound makes it easy to
find an affordable policy