Why Businesses Fail - And What You Can Do About It!

Have you unintentionally set your business up for failure?

No one sets out to fail! Most business owners read all the statistics (maybe more than once) before they open their doors. Many know the reasons why businesses fail. But some businesses operate under this paradigm: "failure can never happen to me because I know better." Is that you?

What most business owners miss is looking at the reasons for business failure and turning them into action steps to help overcome the odds of failure. How do I know? I once thought I knew better, too!

Bear in mind that even "adolescent" businesses fail. According to the SBA statistics, 90% of small businesses fail within the first five years. Many businesses aren't producing enough income because the business owners aren't "business wise." They may be excellent at a specific task - consulting, programming, massage therapy, web site design, copywriting, etc. Or they have a great product. But wise about the "business" of business, they are not!

In the past five years of my business, not one client (including those who have been in business for more than 10 years) provided me with a business plan to review. Not one! Two of 100 clients have had marketing plans, but marketing plans don't work without a business plan and other focus type tools, too. The other common (95%!) mistake I see (and help my clients correct) is pricing their services very low as a way to gain market share and new clients. So low, in fact, that a potential buyer will perceive the service or product as being cheap and of low quality, even when the provider offers years of expertise. NO ONE wants to hire a business that is cheap! Inexpensive - yes; affordable - yes; cheap - no, no, no!

The most common problems business owners experience stem from simple functions like streamlining, organizing, information resourcing, marketing, planning, visioning, languaging, communication, technology and ecommerce. Example: If you know that most businesses fail because they don't have a usable business plan, develop your own business and marketing plans and use them daily; don't create one that gathers dust on a shelf. I use the One Page Business Plan Book or Interactive CD by Jim Horan. It helps business owners create very realistic, focused, and well thought-out business and marketing plans, including scorecards to help you anticipate and avoid business problems.

Example 1: Recently, a client turned down an opportunity to teach computer classes on a subject she could easily teach. Using teaching to market her business is on her marketing plan. So why not? Well, the proposed classes weren't going to help her get business for her primary business, they weren't going to attract her ideal client, and the pay was much lower than her usual hourly rate. She felt confident about declining the offer. Of course, that same week, other new business - the type she really wanted - came her way!

Example 2: New client knows she wants to create a business plan. She also has a strategy of increasing her income by joining four organizations with networking opportunities for her to meet her ideal clients. She joins the first two groups - total cost: $400.

As she starts her business foundation work, which includes the One Page Business Plan, she realizes that her ideal client isn't whom she originally thought it was! Some clients might be found in the two groups she's already joined, but not her ideal clients. As a new business owner, she wants to spend her time around her ideal clients, first and foremost. Planning just a little more for her business would have saved her $400 in membership fees.

What other simple things can you do to build a solid business foundation?