According to the U.S. Small Business Administration, almost 80 percent of small businesses survive for at least one year. But that percentage goes down significantly in the years following the first one with companies enjoying less and less success in business.
Only about 50 percent of small businesses survive long enough to see their 5th anniversary. And after 10 years? About 70 percent of small businesses have closed up shop.
There is no way to guarantee success in business for a company. But one thing you can do to keep your company afloat is to avoid making some of the crucial mistakes that keep businesses from reaching their full potential.
Here are some of the common mistakes that prevent companies from sticking around longer.
Growing Too Fast
When you start a company, you do want it to grow. But you don’t want it to grow too fast since you’re going to have a tough time keeping up with it if you don’t scale slow.
There are a lot of companies that jump the gun and begin hiring lots of employees and building new warehouses as soon as they achieve just a little bit of success. But before long, their spending spirals out of control and they can’t keep up with the bills that pile up.
When this happens, many companies have to start to scale back before they even have a chance to hit their peak. That often scares off future investors and gives people the impression that a business isn’t doing well. It’s only a matter of time until they have the pull the plug on their entire operation.
Businesses are much better off scaling at a slower pace. It’s better to grow a little each year over the course of a decade than to try to jam-pack a bunch of growth into a single year.
Hiring the Wrong Employees
As a company grows, you’ll need to bring new employees on board to help it run. If you’re the owner of a company, that’ll mean relinquishing some of your control and allowing someone else to steer the boat.
In theory, you would think that this would mean business owners would think long and hard about who to hire. But far too often, they miss major red flags when interviewing people for management roles.
When you don’t have the strongest possible employees in management positions, it’s going to affect your entire business. You need to put people you trust into positions of power and surround them with young talent that can grow into leadership roles later.
Not Spending Enough on Marketing
McDonald’s is one of the biggest companies in the world. They rake in more than $20 billion every year and could get away with spending a whole lot less on marketing than they do right now.
Yet, it’s almost impossible to sit down and watch TV for an hour without seeing a few McDonald’s ads. The company spends upwards of $2 billion on marketing every year to keep their name alive and out there in the world.
Your small business is obviously not going to be able to spend $2 billion on marketing. But you should make it a point to create a marketing budget and spend your marketing dollars on the right initiatives.
Consider who your target customers are and find ways to market your products and/or services to them. In some cases, that might mean running TV and radio ads, and in others, it might mean pouring money into beefing up your website’s SEO and investing in Facebook ads.
But whatever you do, don’t (ever!) forget about marketing. It’s arguably the most important aspect of running a successful business.
Forgetting Loyal Customers
If you’re going to achieve any measure of success in business, you’re going to need to develop a faithful following. You need at least a small group of customers at the beginning who live and die by the products and/or services you sell.
Those companies that are lucky enough to attract this kind of rabid fanbase need to hold onto them tight and make sure they cater to them at every turn. Whether that means offering special discounts to your most loyal customers or starting a customer appreciation program of some kind, don’t ever forget who helped put you on the map at the very beginning.
Failing to Plan Ahead
One of the toughest parts about running a business is trying to focus as much as you can on the present while also keeping one eye on the future of your company. Business owners need to plan 10 steps ahead to avoid falling behind in the future.
Creating a well-thought-out business plan when you first jumpstart your company is one way to make the future a priority. A business plan can help you stay on track by setting goals for your business as you move forward.
But you also need to adjust your business plan based on how things go during your company’s first few years in business. If things go better than planned, you’ll want to consider how you’re going to scale your company, whether or not you’re going to introduce new products and services any time soon, and more.
Additionally, you should plan for the worst and think about what you’ll do if your business ever faces a disaster. It never hurts to do disaster recovery planning, just in case. This way, your company won’t get caught flat-footed if an unforeseen circumstance puts your business in jeopardy.
Achieving Success in Business Is Tricky
Nearly 10 percent of American small businesses close every year. Some do it after people stop buying their products or services, while others do it when they mismanage funds and run out of working capital.
If you want to put your company in a position to achieve success in business, you’ll need to come up with a winning business plan and stick to it. But you’ll also need to make sure that you don’t make any of the mistakes listed here. They could cripple your company if you let them.
Want to learn some more tips for running a successful business? Check out our blog for additional business-related tips.
