I’ve learned a lot of things that help businesses succeed and fail over the years. This comes from my own experience and also the many business owners I am exposed to in one way or another. These insights are about helping you, depending on the situation you are in, to avoid some of the very obscure mistakes myself and others have made.
Some of you are looking for lifestyle businesses, some of you want to spend your days working on your passion and getting paid for it, some of you want to be the next Facebook. Whatever your business goals are, there are some takeaways here that might fit your current situation, reveal some blind spots, give you new ideas to try, or illuminate ways you can avoid 20 things deadly to small business.
1. Ineffective personal life
Relationship, finance and health issues can all rear their head and contribute to weaker business performance.
People like to convince themselves that their work life can be separate to your personal life, but in reality, they collapse together. When both seem overwhelmed, remember that you are the common denominator. The adage “you are your business” couldn’t be more true. In order for your business to succeed, your personal life has to be working well too.
Many people lack any self-improvement rituals. These rituals can be the most powerful tools to help you deal with relationship, finance or health traumas. When you start to feel overwhelmed or stressed, go into a state of simplification; identify your most important goals, tasks or needs and prioritise them. The most important part is to keep optimistic, to paraphrase Confucius: “those who say they can, and those who say they can’t are both usually right”. All of these will help you stay resilient and ready for the challenges that come your way.
2. Gut based decisions
Forming insights based on your gut instead of data is very risky for the inexperienced. Cognitive dissonance is your biggest enemy here. The unease you feel when you have one belief you try to support day to day, but have another running in the background that is uncomfortable, but may actually be the right belief. You are essentially running contradictory beliefs.
Data and facts can cut through the established bias. It’s important to look at the numbers even if you don’t like them, and be comfortable with a resulting paradigm shift.
Victim mindsets don’t survive the stream of problems that crop up during the lifespan of a small business. You have to operate from an optimist’s perspective. You can’t achieve things when you think life does you – it doesn’t, you do life.
Pessimism will also kill your perseverance. Passion can create perseverance, positivity and resilience – that willingness to keep going no matter what. You need the belief that the only way you fail is by giving up.
4. Addressing markets widely
If you are new to business and you are time and capital poor, it might work to create a specific focus tighter than what was laid out in your original plans so you can concentrate your capital and resources on that. Going after a niche can help remove the disadvantage of lack of funding, and is especially important where there are already many competitors. A niche allows you to create a variation of your offering more appealing to specific market.
5. Competing instead of differentiating.
If you aren’t innovating you may be the same as what already exists. If you aren’t the lead innovator you must then be the follower, but that’s okay! Sometimes it’s better to be a fast follower. A fast follower with capital who doesn’t have to educate the market is at a serious advantage. Leaders in the market have the cost of creating awareness and educating new markets.
6. Many digital systems
Spending too much time setting up the systems of your small business is often a self-inflicted distraction from doing the harder things like inventing and selling. Sometimes building internal systems can be very satisfying if you are technical, but you could be wasting time trying to build the digital holy grail.
Are you making a digital birds nest of complex systems? My tip is don’t build it, subscribe to tech services. Get all you finance, website templates, shopping carts, and other commerce systems all off the shelf. You’ll save time, and have fewer, but more meaningful cogs in your business machine. Your internal admin will be lower. Your risk will be lower. You will be able to scale faster. You won’t have to update your systems, when you subscribe to software, they do that for you.
7. Inappropriate channels to market
Building your Facebook page may be more important than a website because different industries are suited to different channels. Sometimes Facebook is a total waste of time because your audience simply isn’t there, they are over on Snapchat, Amazon, eBay or your local Newspaper. Less marketing channels with greater focus saves you time and money. Use data and research to test, improve and then scale the channels that work. Make sure to experiment.
8. Slow first sale
Your first sale – it’s the first chance in your new business that you get to learn, adjust and improve your offering. It’s your first iteration. It’s also the first insight into sales channels or advertising that worked. Without your first sales, you can’t iterate and develop your offering fast enough. Often a first sale will come from your personal network. Sometimes people don’t have this identified as a source of sales.
Getting a Sale is about getting a chance start learning as much as it is to start making mistakes which you can learn from.
Don’t allow failure knowingly. A ‘fail to learn’ mindset is a bit cancerous in the startup community. Instead, learn from failure when it happens but never seek failure. Always try and put your best effort forward.
9. Not understanding customers are a sales team
Evangelised customers are a free sales teams. Your job is to work out how to help them share your story. You need to make sure they know what you do and why you believe in it so passionately. It is your story that might inspire them to share amongst their friends and tribes. Customers will always be your first and best sales team.
Always try and find ways to monitor leads and referrals. It will help you understand what makes a customer refer you. Is it product? Personalities? Service? Or some other factor. There’s a builder I recommend all the time because I have seen his work, seen how neat the worksites are, and how he has his employees respect people’s homes. So I refer business to him constantly and he doesn’t even know it.
Sales staff are on your balance sheet, customers are off-balance sheet and are free. They give you feedback, they teach you. My tip is to operate from the perspective of learning and gratitude when it comes to customers.
It is not unusual to find business owners constantly looking inward at their business, its operations, its production lines or services etc. However, it’s more powerful to look from the perspective of the customer. Being customer obsessed forces you to critique what you do from their perspective.
Saasu, as an example, focuses on creating increasing simplicity. We thought our product was simple, but as we shifted toward a customer experience driven business, we found we were too complex for the market we are addressing. Even our competitors are significantly complex now. Secondly, we focus on great value, that’s what nearly every small business wants – value for money.
Becoming customer obsessed can greatly expand your perspective and shift the way you do business for the better.
11. Saying yes too often
No is focus and curation. Yes is mediocrity.
If you accept every opportunity, you are averaging. You have to master the art of saying ‘no’ all the time and right from the start. Not all opportunities are created equal, and saying ‘yes’ too much can wreck your business. The most important and uncomfortable thing you will need to do is say ‘no’.
12. Focused on funding ahead of strategic decisions
If you had the ability to make perfect decisions you would not need funding; it eliminates funding. So funding is coverage for decision failures. These might be marketing decisions, product decisions, hiring decisions etc.
Funding is also how we buy time, manufacture and accelerate a faster result. It’s how you pay for accelerated growth. So funding isn’t bad, it’s just that people need to recognise the truth of funding rather than be romantic about it. Funding helps cash flow. We all know cash is king. Cash flow is definitely in the top of the most important list, but it is a derivative of business decision making.
Once you understand this you start holding your decision-making skills more accountable for success. You are forcing yourself to take extreme ownership of your results rather than blame lack of funds or blame the marketplace. So the lesson here is to spend more time learning, exploring and analysing in order to make better decisions.
13. Using old paradigms instead of disruptive new ones.
Paradigms are rituals and habits that are hard to break. For example, some people start tech businesses and get into in-person networking at events. It’s an old paradigm. They should be developing systems and processes that network digitally. Imagine if you started Facebook and tried networking in person as a way to grow that business. You should be inventing improved paradigms versus competitors.
There are many traps in this area. Using ‘flash money’ as Eddie Murphy called it, to promote your business instead of smart money. Like buying expensive work vehicles, or any marketing that is more about ego than science. Be careful not to blow money on naff marketing ideas but keep it for tested activities that have a good return on investment.
Another paradigm I see in startups is a belief that they have to be lean. The lean startup. There are business owners that think they have to raise capital from family and friends to get started. Maybe they should alter the business model (or approach) in order to prevent future conflicts.
There are also startups who think they are in the business of capital raising and spend all their time on it. They don’t follow everyone else’s paradigm, but they get sucked into it. If you follow everyone else’s playbook, you might get the same result. Keep in mind that only 10%-15% of small businesses survive that first year.
14. Partnering hastily instead of a long dating cycle
It takes many meetings in a variety of contexts before you get to know a potential partner. Don’t rush in. This applies to new investors more than anything. No-one you just met in the last 12 months should be a co-founder or key investor with controlling or day-to-day interests. Your chances of conflict are high.
15. Competing hard instead of innovating to stand alone
Is your offering unique or niche enough? If not, you are competing head-on with existing success. It may be costly going out to a big broad market.
16. Manual tasks instead of automation
When you think about it, our day is filled with all the activities you can’t or haven’t yet automated. The most valuable commodity is time, and automation creates time. It does this in an ongoing way. Always try and buy time cheap when you can. Automation is one way to do that.
17. Complex business plan
Simple plans are like sweet undiluted cordial. Just describe what you are doing, your vision and your brand. Then set goals and the strategy to achieve them. The specific actions you need to take should reveal themselves from the strategy.
If, for example, your strategy is to get your name into the community by sponsoring kids sport, then some actions are to look at attendance numbers, sponsorship costs, work out if it’s viable, get collateral produced etc.
18. Doing it yourself instead of expert people and systems
The stuff you aren’t good at might be wrecking your business. It’s tempting to do everything yourself and save some precious dollars, but you do actually pay indirectly through a lower quality output in various areas of your business. A group of specialists will always outperform a lone wolf all-rounder.
19. Manufacturing (in the small business context)
Products that you build can be very capital intensive and might have long lead times. That’s a cash flow issue from the very first day you start the business. Some business models are progress payment funded like building houses, so there are many exceptions. That being said, I see many business who struggle to manufacture because of the time it takes to see first revenues and all the problems that come with designing, building, ensuring quality, compliance etc. The system issues are also quite complex.
I don’t want to discourage people from manufacturing something, it’s probably one of the most rewarding things you can do. They’re actually my favourite type of businesses. I just think it’s critical to see it from a perspective of cash flow reality. Deep pockets, industry experience and huge amounts of perseverance are pre-requisites that can help you muscle through that long initial cycle of research and development. If you don’t have these things, then the odds are massively stacked against you and should be something worth considering before moving forward.
20. Poor Timing of market entry
The No.1 killer of Small Business is poor timing. If you are too early or too late, it can be fatal. It’s a timing that relates to the market desire for what you have. So it’s about demand-side timing, not how quickly you can get out into the market. Often, the first to the market actually loses, while someone in the middle often wins. Ask yourself do customers want this now? Do they even understand it? Do you have to spend too much time and money educating the market?
I hope you have found these tips helpful. I could easily make this list 50 things long, but I wanted to start of with some off the important ones and follow up with more later if these insights are helpful to the small business community out there.
Photo by Ingo Stiller