By Kelcie McKenney
80% of small businesses fail in the first 18 months, according to Bloomberg. That’s a lot of new businesses, and in our economy, nurturing those companies is a must. So why are so many businesses struggling in their early stages? We’ve pulled together seven of the biggest reasons small businesses fail in those early months.
1. Not understanding accounting
As a small business it’s difficult to wrap your head around accounting, especially if you aren’t an accountant and don’t have one on staff. Managing your money is the first step when it comes to the success of your business, but you can’t manage what you can’t measure. One of the biggest mistakes small businesses make is not having a full understanding of their numbers. If a business is just starting out, hiring an accountant can be expensive. But, tools do exist that can give you the information you need without paying someone full-time.
2. No clear view of cash flow
When you’re starting out, having a long view of cash flow is vital. As we all know, the business environment is unpredictable, and anything could happen at any point that might affect your business. “There is nothing so terrible as activity without insight,” said Johann Wolfganag von Goethe. He might be a German poet, but the message rings true with your business. We recommend a 13-week cash flow report in order to get a full grasp on your company’s standing if you want to be able to prepare for the unknown.
3. Operational inefficiencies
Sometimes new businesses can get caught up in unnecessary expenses that aren’t worth the return on investment. When you get bogged down with tools that eat away your budget, you lose opportunities to grow your business. There are a number of tools that really do have the potential to help your business, but if they are designed for large companies or cost more than your spending limit, it just isn’t worth it. Recognize where your business stands and work within your limits. There is no reason to reach too far too fast, take it a step at a time instead.
4. Lack of information or a long-term plan
Businesses fail because they don’t have the right information to prepare for the future, optimize present operations or respond to market changes. Knowledge is power — you’ve heard it before, but it’s true. Knowing every aspect of your business, from your best accomplishments to your weak points, allows you to move forward.
Too many businesses don’t have a full understanding about what is happening in their business, and that leaves them left behind in the dust — you don’t want to be in the dust. Instead, you should be looking at the horizon with plans on how to get there. Map out what your goals are and set ways to work towards them.
5. Inability to clearly define and understand your market and customers
Whatever you are selling, whether it be a product or a service, you absolutely must have a firm grasp on your current market and who your customer is. Too many businesses might have a good idea, but they don’t realize other businesses already exist with the same product or they don’t recognize what potential customers actually want.
“In my experience, this is the worst move an entrepreneur can make because complete understanding of your customer is imperative to your success. Listen — in my mind entrepreneurs must walk 1,000 miles in the shoes of their customers. Not 10. Not 100. One thousand,” said Eric T. Wagner, an entrepreneur and contributor to Forbes.
Having communication with your customer and knowing the market you’re working in helps with that. We recommend creating a system where you hear from your customers on a regular basis, whether that be monthly, quarterly or of your own design. That communication will give you an advantage over your competitors, a necessary advantage for that matter.
6. Overgeneralization of what’s happening in your business
Sure, you might have a big-picture view of what’s happening in your company, but do you really know every detail? How are your team members performing? Are you meeting your quarterly sales goals? Weekly sales goals? Are your customers happy? These are important questions, and you should have easy access to the answers. The only way you can keep your business ahead is by knowing the details. You shouldn’t have to dig through data or waste time pulling reports together, instead find a system that puts vital information at your fingertips.
7. Believing you can do everything yourself
When a business is just starting out, all hands are on deck. You have an endless to-do list, but never enough people to complete it. Another big mistake as an entrepreneur is thinking you have to do everything yourself, without any help. We’re not talking about delegating tasks or hiring employees you can’t yet afford; we’re talking about finding tools that can help you with running your business. The reality is that you don’t have to do it alone. “There’s nothing wrong with staying small. You can do big things with a small team,” said Jason Fried, founder of 37Signal. Find the tools that help you, no matter how small your team is.
Any of these problems sound familiar?
We just might have the solution for you. The Kakkuro Suite is a four-part tool that covers Accounting, Customer Relationship Management, Projects and Dashboards, designed by entrepreneurs, by entrepreneurs. If you’re a small business trying to fight the “big boys,” you need somebody in your corner. Try a 14-day trial of Kakkuro for free and see what it’s like with us helping your business grow.