Why do businesses fail to succeed when everyone has an equal chance? It may be a factor that can not be fixed or it may be you
Businesses that fail in the three-year window
The British Telegraph says that 60% of all businesses in the UK fail in the first three years and 20% are gone by the end of year one.
When you consider the financial and emotional loss created by a failed business you might well wonder why we are still lining up to
give it a try.
Failing in business will affect you and all around you for some time as you leave a trail of debt and broken promises
However, many predictors could have established this path early in the career and set about making changes that would
help avoid you going under.
Building your business plan and cash flow journey
A business dream does not quite make a detailed three-year plan. You must understand completely where you are going and what is required to get there. Some of this is purely mathematical input based on logic.
Let's assume we want a men's fashion shop
| Rent. for a small shop front in a busty area | $2000 a month on a three-year contract |
| Insurance. Loss, liability, out-of-work, staff | $ 250 a month or an annual fee |
| Stock. about 2.5 months of sales | Based on sales at $50,000 |
| Labour, sales service, and support | Say two people at $3500 a month |
| Marketing | this will be about $1000 a month min, web page posts, etc |
| So total outgoing s | about $10,500 a month ( not considering seasonal demands) |
| Sales margin to meet the figure | let's assume a 100% margin and no losses |
| To cover our $10,500 we need sales of $21,000 | Assume an average item at $100 |
| That's 2100 items / our 22 days of trading | 95 items a day at 15 minutes a sale we are really under the pump |
| Tax and other overheads | |
| Profit | You need to add your wage and profit back into this calculation |
The purpose of this is to show that a good idea might not succeed. It would be doubtful you would achieve anything like the sales you need in the first years or even the second and cover the necessary overheads
When you add to this a cash flow it would be a scary figure that could only see a loss except for the overly optimistic. Don't be him.
Ignoring seasonal influences explained
Would it be better to buy an established business?
At least when you buy a business you know what to expect however you will pay out about two years of net profit for the privilege. At least you get a track record of results and can build an estimate on that. Only work on Accountant figures and never take into account promises of extras from cash sales or free sales of any kind not recorded. Many people have been caught with false promises.
Lay out your plan and estimate if you will fail or succeed on the figures provided, if in doubt walk away.
Does your staff make a difference in the results?
The stall will be a leading factor in determining success. However, in many cases, they will represent your behavior be that good or bad. Therefore leadership by example is required.
I have had reason to visit an International retailer of footwear in a large shopping center in recent times. The staff are all rude and dismissive and causing the brand a lot of bad publicity. I am sure turnover is down as people walk out in disgust at the high and mighty attitude of all the staff.
Staff generally reflect the management so you need to put on the best display so that the copy versions of you will result in happy customers.
Establishing a report with customers
Let's face it customers are the reason you open the doors in the first place and the single biggest factor in your future success. Furthermore returning customers cost less to attract than new ones so are on top of your VIP list.
Customers have the ability to vote with both feet, if they don't like you they will use them to walk out and never return.
Why do businesses fail to succeed could be a database
Building a Database
Knowing who your customers are and communicating with them is essential to all business growth. You need to have the contact details of everyone that comes to the store or buys online and build a marketing plan around your list.
I had a friend that closed her shop after a lack of sales and continual losses. A competitor approached her and offered a considerable sum for her customer base. A sum that would have covered her losses. She did not have one nor ever thought of building one and yet it could have been the most valuable asset she owned.
Fish when the fish are biting
Every business has seasonal influences that will affect turnover. You can advertise as hard as you like when the time is wrong and always get the same result. That is why your plan should consider these times and make alternate arrangements. Certainly, in a clothing shop, as our example, you can push the new season apparel but selling snow jackets in Summer is hard going.
Holding back for BlackFriday, Christmas, or local events and concentrating your efforts in the peak times will give better results than pushing against a season.
Discounting needs to be done properly
Pivoting can be a game changer
Many businesses will take a fundamental change in operations to achieve better results. Trying to make a bad decision better can be difficult while looking at other options may be easier.
When you have the infrastructure and the traffic there is a chance of changing established patterns may make a big difference. When you understand your clients you can better judge what they desire. Your men's department may add a range of sports watches that are targeted around your demographic. Maybe a female clothing rack so the wives are catered for as well or perhaps a gift section. Similarly don't hesitate to close out the dead areas of your stock when they are not working.
Dead Stock is dead money so quit it any way you can and convert the money into a better offer.
Reframing your decisions explained
Reward your returning customers
Lifetime customers are the lifeblood of all businesses so look after them like they are family.
Let them know how much you appreciate them and stay in consistent communication with special offers and customer benefits
Rewarding customers is essential to success
When the hurdles are unmanageable
Sometimes outside factors that we have no control over change our business. It may be a road diversion that changes traffic flow or denied access in some way. The answer is to move and not fight it. Make a decision quickly and act in a way that will give you a better chance of success.
Why do businesses fail to succeed it's not the competition
Competition is not bad
I have a friend that owns a shopping and food plaza. The key tenant is a food and coffee outlet and when told that a major food shop was coming to the center he complained long and loudly. The result was that his business increased with the extra traffic coming to the area.
Why are car-selling centers clustered together? Because they attract customers as do repair centers and mobile phone shops.
You want your share or a bit better but you can never win them all
Conclusion
Small business is a great place to be but you need to be in the thirty percent that will make it.
Do a new plan every year and work on the plan to meet what you want or change to achieve a better outcome. It is up to you.
