5 Small Business Pitfalls to Consider
According to the latest ABS figures  there were over 2,066,806 small businesses in Australia in 2016. More than 60% of these businesses are expected to close within the next 5 years. However, the overall number of small businesses will continue to increase as new businesses continue to open.
So, why is it that the majority of smaller businesses are projected to potentially close within the next five years? The primary factors that can lead to the collapse of most businesses are bad financial management, no market need, inexperienced teams, too much competition, sales and marketing problems, and bad pivot decisions. To ensure your business’ success, you need to face each of these factors head on.
Have you ever thought of selling ice-creams on the beach in winter? Or selling cosy woollen jumpers during the sweltering summer heat? Timing is everything in business, having a great product and a motivated team is not a clear cut recipe for success. In their article 10 great ideas that were ahead of their time, Business Insider relay the anecdote: “Being early is the same as being wrong.”
If there is no demand for your product/service then there is no revenue. All business matters come down to that simple fact. You can only sell your product if there is a need for it. You can ascertain this by engaging in market research, reaching out to your customers and business associates for feedback, so you know that your product/service is still relevant to the marketplace.
Success does not happen overnight and it rarely happens to just one person. In business there is a team. A competent and cohesive team who work together, ensuring success becomes much more tangible. An inexperienced or unbalanced team spells doom.
Many small businesses are fixated on chasing revenue to their own detriment . What a lot of business owners fail to appreciate is that increased revenue does not translate into instant success. Be engaged with your employees, and ensure that everyone knows that they are appreciated and that you are all working together towards a common goal.
Market saturation can be the flood that washes away all your hopes of business success. If you found when you first started out that there was little to no competition, this could be synonymous with the honeymoon period in a relationship. It will not last.
As soon as some other entrepreneur or a larger – and more financially stable – business notices your relative success, they will ride your coattails and use what they’ve gleaned from your operation to create their own similar product or service. Thus, the competition spikes and prices lower – which is great for the consumer, but not so great for the small business trying to make it in the corporate world.
To survive the competition in the marketplace, you need to set yourself apart . This could mean launching a marketing campaign which showcases your individuality, or diversifying your business – don’t get lost in a sea of competition.
More than half of all small businesses have a loan facility of some sort. Financial mismanagement is the number one reason small businesses fail.
Matching the terms of your finance and maintaining a cost control strategy from the beginning of your operations will greatly help to avoid pitfalls that could spell doom for your business. You can avoid this by setting up a precise budget, allowing you to manage your finances easily, accurately, and without incurring extra costs.
As a small business, in all likelihood the majority of your budget is going to be going towards creating and distributing your product/service. In order to generate sales you need to successfully market your product/service, but often smaller businesses do not have the financial capability for launching a costly marketing campaign.
To circumvent this you need to think creatively. Utilise the digital marketplace to increase your business’ visibility to your customers through the use of active social media, email marketing, an easy to use website and online shop. All of which can be done with a small budget. The Business Standard recently reported that online shopping increased over 80% in 2016. And while Australian consumers still seem to prefer shopping at the shops, the trends are showing that increasingly people are purchasing online . This is a marketplace you can’t ignore and a create way to convert sales.
Risk is a matter of perception. Oftentimes an entrepreneur is remarked as having an eye for business, an intuitive sense of where the markets are heading. It is important to adapt to the marketplace, but it is detrimental to make risky pivot decisions . The risk for smaller businesses is that they can’t afford to be wrong most of the time. If they take a gamble and lose, they might lose everything.
Although it is good to be agile and adaptable in the workplace, there is a difference between a fad and a trend. Avoid changing your entire business format on a whim by conducting thoughtful market research. Investigate trends, customers’ needs, observe your competition, be open to change, but be critical of advice.
About the Author
Charles is a freelance writer and small business journalist who works with established and emerging journalists and publications. Connect with Charles on Facebook for more insights into Small Business.