Every entrepreneur knows starting a business is very hard. However, what many entrepreneurs find is that growing your business is even harder.
What Percentage of Small Businesses Fail?
The fast answer for what percentage of small businesses fail, according to data from the Australian Bureau of Statistics. About 20% fail in their first year, only 70% of businesses will survive their second year in business and about 50% of small businesses fail in their fifth year. The good news is about 30% of businesses will survive their 10th year in business.
So why do so many businesses fail? What we have found from our client work is entrepreneurs typically face a common set of challenges.
The key is to understand that in the Start-Up the focus is on the value of your GREAT IDEA. By stepping through the Start-Up phase in an organised way you end up with a few customers typically in Pilot projects to validate that the GREAT IDEA has commercial application. As you move into the Early Stage Revenue Growth phase you need to change your approach. Start thinking about repeatability and scalability of the product or service offering and to think about the team that is going to drive the business growth.
Key Tips
Business Plan
Without a Business Plan you are bound to fail so the very first step is to prepare a realistic Business Plan where you explain how you will grow your revenues. In particular you should identify the market needs your product and services will address. Understanding the resources you will require and the business risks will be important in this process.
Marketing Plan
Apart from a Business Plan it is fundamental to have a clearly articulated path to market for your products and services. We are always challenging our clients to explain WHY the market will buy your product and services. What are the pain points you are taking away from your customers? Where do you fit into the competitor environment? Both are good questions to answer early on.
Product Plan
Most entrepreneurs are passionate about their own product and services offering but surprisingly in many cases are not aware of the appropriate price points and GP required to make the business sustainably profitable. We are also seeing much more emphasis on innovation and digital disruption in the market. The successful early stage growth business owner understands the customer experience is fundamental to their success.
People Plan
Do your people understand the Vision and Purpose of your organisation? Without strong leadership and creating a mindset for a winning culture your employees and partners will struggle to help you grow your business.
Funding
Many good companies fail within the first 5 years simply because they do not manage their cash flows. You need to be on first name basis with your bankers and shareholders and build trust by delivering on your Business Plan. Your great products and services are not enough. By being conservative with you cash reserves and bank facilities is funding rule 101 in any business.
Next Steps
If this blog has inspired you to consider using an experienced business advisor to help with growing your revenues and achieving a sustainable profitable business we would love to talk with you. We will listen to your challenges and help you to understand how to maximise the value proposition to your customers and ultimately to the value of your business. Call me on 0401767639 or send an email to john@lindfieldpartners.com.au. Good luck with your business and hopefully we will read about your successes in the media soon.