5 fatal things for a small business and how to avoid them
Small businesses have the challenge of competing against major corporations and larger businesses whilst using usually having much less resources. It takes years to build up a loyal customer base, but only a second to lose them. And while there are many reasons why a business may do poorly and fail, here are 5 things that could kill a small business.
Number One: Cash is the life blood of your business
It may sound obvious but it´s a fact that should be at the forefront of the mind of every business person every day. As the saying goes, cash is king and for good reason. Run of out of cash, you cannot meet your expenses and you are out of business.
You should ensure that you have sufficient cash reserves, a rule of thumb I was once told was to keep at least three months worth of monthly fixed expenses in reserve as a minimum.
Business can be unpredictable and unexpected expenses can appear from nowhere so be prepared. Start-up businesses are quick to receive offers for financing and for special programs from the government. The problem is that the assistance provided is generally loans and not grants.
With grants you do not have to pay the money back but with loans you do. Even with a grant you run the risk of killing your business if you depend upon such grants to keep you afloat.
Small businesses should keep in mind that legislation changes often and that the funding that your business is receiving today may be stripped away or done with tomorrow. If the majority of your businesses finances are allocated through Government dependence and grants and such is pulled, you will have to re-allocate your financing or your business will die.
If you are running on grants, loans or investor funding plan ahead to make sure you have sufficient funds. Lastly, another great saying is “turnover is vanity, profit is sanity”, very wise words, be sure that you are actually making money, just because you are making sales and have a high turnover doesn´t always mean you are making money. Stay on top of your operating expenses and buying costs to make sure you are making a healthy profit.
Number Two: Online reputation
In the old days, an unhappy person may tell a few people about a poor experience and probably in most cases, the damage would be limited except in extreme cases where the press may have picked up on it.
Today the landscape is completely different. An unhappy or dissatisfied customer has a multitude of channels on which to communicate their grievance to the entire world, Facebook, Google, Trustpilot, Twitter and Tripadvisor are just a few examples.
It is important to monitor and acknowledge good and poor reviews and offer help. Consumers are more and more swayed towards buying products and services from businesses that are reputable online so it is essential to present yourself that way. Most people understand that not all customers will always be happy and also understand that not all complaints are genuine.
By acknowledging complaints and providing assistance potential customers are reassured. The best way without doubt is to actually provide the best service you can as the opposite is also true.
If you have an exceptional reputation you will see a jump in business. For example, if you run a restaurant and are top of Tripadvisor in your city you will most likely be fully booked. It´s a double-edged sword that should be respected.
Number Three: The smart Phone
Smart phones are a great part of our personal lives, and that is where it should end. There is no place for personal mobile phones in the workplace. It has been estimated, according to inc.com that small businesses have a 61% chance of employees using his or her cellphone for at least 30 minutes each day. That is 2.5 hours a week and 130 hours a year.
Times that by the number of employees that you have (let’s say 10) and you could be losing 25 hours a day of paid productivity. Employees should keep their cellphones in their car, locker, or in a dedicated safe place away from the workplace.
If there is an emergency their friends, family, and loved ones should have the direct number to the business. Personal mobile phones can be a distraction and a drain on your resources so keep them in check in the workplace.
Number Four: Lack of Marketing
Word of mouth is not sufficient to keep a business afloat. You have to have a marketing campaign and that campaign must-have social media involved.
Marketing should include focusing on your target audience, empowering your consumer, building loyalty, and expanding your client list. Print material should be limited to targeted areas. If in a rural community do not forget to get involved with the community through programs to build up your branding.
When building your online marketing strategy, have a mobile-friendly and responsive website which can be shared and accessed easily. Keep a blog and allow for communication between the customers and the business to build up a personal connection with the community. Again, moderate comments to keep negativity at bay.
If you have subscribers to your site or to your email, keep them informed but do not spam them or send messages to them daily. This is annoying for the customer and they will be less prone to do business with you.
Number Five: Poor Customer Service
Your small business can have everything right in terms of marketing and products, but if the customer service is lacking, people will take their business elsewhere.
Employees must understand your products and services and be able to answer questions. Customer’s complaints should be handled in a soft and re-assuring manner.
Remember that the clients are the ones who build up your company. Without customers, you do not have a business.
There used to be a slogan which was embedded into the hearts and minds of small business owners “the customer is always right”. If small businesses could once again grasp this concept instead of arguing with the customer as to why a certain policy or a certain product is this way or that, then businesses would see an increase in their loyalty, their non-marketing referrals, and their overall profits.
This is by no means an exhaustive list but a few things every business person should be aware of to keep their business healthy and profitable well into the future