If this is your first year as the owner of your own business (startup), there are 2 things you need to know. The first is that most new businesses in Australia eventually fail, about 95% according to a recent study from BlueChilli. The second is that you don’t have to be one of them.
Why Do So Many New Businesses Fail?
Statistic Brain decided to get an answer to that question by asking leaders of major companies what in their opinion contributed to new business failure. The results, Startup Business Failure Rate by Industry, listed multiple traits the new business owner lacked, including the following 6:
- He wasn’t focused
- He wasn’t sufficiently motivated
- He refused to listen to the advice of others
- He listened to the wrong people
- He didn’t have a knowledgeable mentor/coach
- He lacked knowledge in areas like finance or marketing
How Can I Increase the Odds My Business Will Succeed?
Of course, there are always things which could happen which are beyond your control, but in most cases, whether your business succeeds or fails is the result of decisions you make.
Here are 6 things you need to keep your eye on to increase the likelihood that your business will be among those which succeed:
- Make sure there’s a market for your products and services: one of the biggest mistakes new business owners make is trusting their gut when it comes to product/market fit. What you need is less instinct and more research. The fact that you love tuna tacos doesn’t necessarily mean that other people will latch onto the idea.
- Keep the cash flowing: if you can’t pay your bills, you’ve got a problem. Make sure you have enough reserve cash when you open the doors to your new business. You also need a solid plan to keep new cash coming in. For example, if you’re in professional services, you can require customers to pay deposits on work up-front, with the balance due on delivery.
- Find ways to cut costs: as Ben Franklin was fond of saying, “a penny saved is a penny earned.” Look for creative strategies to cut costs. For example, you could buy used items instead of new to furnish a store and ask if vendors will give you a discount when you pay costs upfront. Other cost-saving measures might include outsourcing non-essential operations, using credit to your advantage, using space more efficiently, and hiring qualified interns for non-essential jobs.
- Eyeball costs high and revenues low: another common mistake is to underestimate costs and overestimate revenues. Go the other way—if a reasonable analysis tells you your first quarter revenues will be $50,000, drop it to $40,000, for example. If a contractor gives you an estimate for his work, jack it up by 10-20%.
- Create a sound marketing strategy: more than anything else, you’re going to need new, qualified leads for your new business. That’s probably going to mean having a strong online presence (including a website that works for your business and generates leads) and a solid digital marketing strategy. It also means continually measuring and monitoring the results of your marketing campaigns—if you don’t know what isn’t working, you can’t improve the process to drive sales and grow your business. Finally, if you don’t have a background in marketing, by all means outsource your marketing to a competent agency. Learn 5 Ways to Build Your Influence Through LinkedIn.
- Hire a business coach: there’s a reason every pro sports team has a coach—he knows more than the players how to win games. The same applies to business. A seasoned business coach can give you the advice you need to win. The best coaches will, for example, help you monitor cash flow, find government grants for which you could be eligible, help you fine-tune your marketing plan and show you how to measure results by examining the right metrics.
Swallow Your Pride—When You Need Help, Get It
Here’s the key takeaway: no matter how passionate, or ambitious, or smart you are, you can’t do it all. No one is a wizard in everything from marketing to finance, human resources, IT, government regulations and law. To make sure you’re one of the new businesses which succeed, don’t hesitate to reach out to those who have the specialized knowledge to keep your business in the black now and into the future.
To learn more about the ways our management, financial and business coaching services can help your boost sales and grow your business, contact us today.
About David Officen
David is the Founder and Managing Director of proCFO. David combines an accounting and consulting background with commercial experience both as a manager for large commercial businesses and as the owner of private and family businesses.