Starting a business is hard, but continuing to grow it after it’s up and running is even more challenging.
There is a reason why small business owners often use the metaphor of a child to describe their business. Like a baby, or a tender plant, it must be delicately nurtured to ensure its ability to grow and blossom. Many dream of watching the small business grow into a large corporation before their very eyes.
Unfortunately, the reality is many of these small businesses die in the early stages of growth. Statistically, over 20% of small businesses fail in the first year, and 60% of small businesses go under within their first three years.
Not every business is going to grow into a unicorn. However, it is necessary to understand what causes many businesses to fail- and learn to manage or overcome these inevitable challenges.
What causes small businesses to fail?
To understand how present-day large businesses succeed, we need to understand why small businesses fail.
Here are the 4 main causes:
- Insufficient capital
Setting up a small business requires a lot of capital. For the most part, small business owners are unaware of how much money is generated by the product or service sales offered versus how much is required for operating expenditure. Funding shortfalls from such a crucial oversight can quickly cause a small business to fail before it can truly get off the ground.
- Poor management
In a report by Fortunly, 71% of small businesses in Canada fail because of management issues.
Most times, a small business owner is the company’s only senior executive. While small business owners may have the skills to develop and sell a viable product or service, they often lack the qualities of a good manager. They also lack the time to manage other employees and aspects of the business effectively.
- Inadequate business planning
A business plan is the foundation of every business – it is effective for creating a growth strategy, ascertaining financial needs and getting funding.
Unfortunately, many small business owners fail to understand the importance of effective business planning before opening. When these businesses fail to address the business needs and craft an effective business plan, they set themselves up for challenges and failure.
- Lack of sales and profit
The best business ideas will fail if there is no market for what you sell, or if the market suddenly disappears because of economic changes or unforeseen disasters.
While you can’t predict the future, before you start a business you need to determine if there’s a market for what you plan to sell and if that market is big enough to be profitable. Keep in mind, that “everyone” isn’t a market. The market must be an identifiable group of customers you will be able to reach and who be willing to buy what you are offering.
As Jim Collins noted, “profit is like oxygen, food, water, and blood for the body; they are not the point of life, but without them, there is no life.
How to grow your small business?
75 % of Canada’s population growth comes from immigration, mostly in the economic category. About 6 in 10 immigrants are selected for their positive economic impact. So the continued growth of small businesses is crucial to the Canadian economy.
Here are seven strategies you can use to grow your small business and scale exponentially.
- Get feedback from your customers
Proactively ask for feedback. Take notice of common complaints and utilize them to introduce new products or make any other improvements. Encourage your customers to leave online reviews, that you should always respond to- whether they are positive or negative.
- Stay up to date
We all know the horrors stories of companies like Blockbuster and Blackberry that failed to stay up to date and respond to social trends. It pays to be responsive both internally and externally.
Take advantage of newer technologies to track trends. More importantly, stay attentive.
- Know your competitors
A business owner must never be overtly preoccupied with the activities of competitors. All the same, knowing who your business competitors are and what they have to offer may help you stand out with your products, services, and marketing. Learn from your competitors’ successes and mistakes.
Ask yourself why customers will choose you instead of another alternative.
- Use social media to your advantage
Social media is an excellent tool for promoting your brand to potential consumers and gaining important feedback. Learn what customers of your products and businesses similar to yours are saying about the product, gain insight into their behaviour, uncover keywords and trends that appeal to your target market, and enhance your customer service by using social listening.
- Create a loyalty and referral reward program for your customers
Getting new customers cost up to three times as much as selling your product to an existing customer.
Create a loyalty program to reward existing customers and encourage them to bring new customers with a referral incentive.
Whether you are selling a product or service, your customers will be delighted if they feel appreciated and rewarded.
- Co-branding or partnerships
This means partnering with another brand or company that might or might not be in the same industry as you but offers services to the same target market.
It will lead to more sales for both parties
From the feedback you have gotten from your customers, what other product or service can you provide in your business? To grow and expand, your business needs to solve problems and provide value. Find out the pain points of your customers. What more can you offer that completes your existing offerings? Look within for fresh opportunities.
And the business goes on
For those considering a startup, here is a helpful guide to starting and registering a business in Canada.
Not every business owner is aiming for a billion dollar evaluation, At the same time, it is important to remember that in our capitalist landscape, stagnation ultimately leads to death.
For your business to survive and grow, it needs to continue growing – as growth is constant. If you have used any of these strategies in the past, tweak them and use them again. The goal of your business should be to offer value and solve problems.
A unicorn company, or unicorn startup, is a private company with a valuation of over $1 billion.