All small business owners can agree that building and operating a start-up is no walk in the park. Not all small businesses are profitable either, and some have met their doom in less than one year.
Sometimes it’s bad luck and unforeseen events forcing businesses to close. But there are times when the business owner lacked the foresight and preparation to make their business survive even without a crisis striking them down. The reasons commonly cited for business failure include lack of business skills and experience, poor planning, and poor cash management.
So what do you need to do to ensure you have a successful small business? Keep the following things in mind.
1. Manage Your Cash
If you think small businesses declare bankruptcy due to lack of profit, that is wrong: it’s the lack of cash and capital. Smart cash-planning is crucial to running a business; any business that runs out of working capital before making enough money to sustain its expenses is a result of poor budgeting or unfeasible forecasts. When you’re experiencing cash-flow squeezes, identify the causes and find ways to solve them.
Additionally, make smart investments that can help you save money in the long run. For example, if you’re in the industry that regularly picks up and delivers bulky cargo across long distances, why not buy a top-quality trailer to use? Cars and other regular vehicles aren’t built to carry the weight of heavy objects like machinery or furniture, therefore using them for heavy-duty delivery may require you to shell out more money for repairs repeatedly.
2. Establish a Data-based Culture
A lot of people underestimate this factor because they would prefer to go with their “gut feeling” without studying data. Unfortunately, that alone won’t help your operations. Data is essential to make better business decisions.
Try tracking your company’s key performance indicators (KPIs). These are metrics that show the health of your company and your progress towards key business goals. Small businesses usually track net profit over time, which helps you see whether you are earning more than you’re spending.
Understanding what makes your KPIs go up and down can aid you in making informed decisions that will keep you on track and eventually scale your business.
3. Have a Business Plan
If not the lack of capital or data, businesses fail because they lack or have ineffective business plans.
Have you ever heard of the quote, “A goal without a plan is just a wish”, by Antoine de Saint-Exupéry? That applies to business as well; preparing a business plan gives you the specific tasks and steps you need to follow to achieve your short-term and long-term objectives. Additionally, one of the good things that a business plan can accomplish for small business owners is that it helps the team see the feasibility of the business and spot potential weaknesses in the ideas.
The Bottom Line
Based on the top reasons why small businesses fail, these are just three things that business owners should do. With these, not only will your business stay afloat, but you can also even grow your company and succeed!
Want a similar read? Here’s a post on how to solve small business management problems.