Running a small business is no small feat. You need more than just a great idea; you need the drive, dedication and strategic know-how to grow that business. Because without growth, your business won’t survive.
A recent Industry Canada report found that 30 per cent of small businesses don’t survive longer than two years and only half make it to their fifth birthday. Yes, half.
Many failed small businesses succumb to the same mistakes. Here is the top five to avoid.
1) No market. Business owner often start a business out of passion, not market research. In other words, this now new business owner has no idea if anyone is interested in buying what he or she is selling. If you jump the gun on passing ‘Go,’ you may find yourself selling a product or service that no one wants.
2) No business plan. To grow your business you need a plan. Without one, how are you supposed to measure success? A business plan is the blueprint for your business. It gives your company a cohesive focus, provides direction for your everyday activities and acts as a roadmap for your overall growth.
3) No time spent on business development. Like writing a business plan, putting time and effort into business development is a key factor to success. Businesses don’t sell themselves. To consistently grow your business, you need to spend 20 to 30 percent of your time on business development activities. And while this can include emailing contacts (either directly or through newsletter mail outs) and activity on social platforms, the bulk of your time should be spent face-to-face.
4) No plan for cash flow. At the beginning of a small business’s life cycle, most owners simply dig a pit of money and cross their fingers that the cash starts flowing soon. But cash flow doesn’t magically happen, it must to be planned for. Every business goes through cash flow cycles. Some months are plentiful and others come up short. You must have a handle on your cash projections so that you can make adjustments ahead of time, not after you’ve run out of cash.
5) No money left for the business. Small business owners often start paying themselves first when the cash starts flowing. Don’t. As the owner, you should be the last person paid, if you’re even paid at all. And we don’t necessarily mean it’s because you’re paying your employees first (which of course you should); it’s that realistically, any money you make is flowing back into the business. When starting a business, you’re not going to make money for yourself for a while. You should have enough capital to support yourself for at least a year without receiving an income. Paying yourself is not a right; it’s something you have to earn.