Over the past few months I have attended a number of networking events some of which have been specifically focused on small and micro business owners. What’s great about these is that you just can’t help but be impressed by their passion and enthusiasm for what they are doing and this is typically the reason the business was established in the first place.
Whilst the number of business failures is not as dire as some make out (according to the Small Business Association (SBA), only 30% of new businesses fail during the first two years of being open, 50% during the first five years and 66% during the first 10), it is still significant and it is clearly not a risk-free undertaking. What typically keeps them going? Passion. However, what is important to note is that passion is a fuel and like any other fuel, it is necessary but not sufficient to drive an engine; the motor also requires oil and electricity in order for any kind of traction to be obtained.
And so it is in business: businesses can’t survive on passion alone, they also need additional inputs to perform and so here are my thoughts on what is required for a successful and sustainable business:
Not understanding the target market.
Many business owners assume that customers will love their product or service as much as they do, but demand is a function of perceived value of which price is necessarily a factor. Understanding the price the market will bear, the anticipated sales volume and what is needed to cover costs is critical if the business is to make money.
Lack of a defined Business Strategy or Business Plan.
There is simply no substitute for defining what you want to achieve, how you will do it, what it will take to get you there and writing this down. If the strategy and/or plan is solid, measures should become easy to see; discipline and accountability will help you get there.
No defined approach to Sales and Marketing.
These are the core drivers to revenue generation and so cannot be done in the margins. Thinking about how your product and/or service will meet customer needs and ensuring that your marketing targets the right customers is essential. A disciplined approach to sales management will then be necessary to fully leverage the opportunities that result.
Not knowing your numbers.
People don’t start businesses because they are good at business and for many the idea of creating a budget and tracking financials is off-putting. However, you must be able to track and manage the finances otherwise you are almost certain to get unpleasant surprises. Managing your financials is not as difficult to do as you may think and the rewards are undeniable.