Here are three ways to avoid your new business from being just another dismal failure stat
Did you know that only around half of small businesses survive beyond their fifth year? And only approximately one in three make it to 10 years?
In my years coaching entrepreneurs I have found there are three key reasons why small businesses fail. I want to help you get to your 10th year and beyond, so I created these points to help you avoid them in your own journey as a business owner.
When we start out in business we are all full of anticipation and energy to get everything done. Initially, most business owners try to save as much money as possible to get their business off the ground, and that means doing everything themselves. But the issue with this belief is that it is costing them more money, stress, and time and the business owner consequently gets stuck in a rut and spends time chasing their own tail.
It somehow seems to have become trendy to talk about how busy you are, and it has created a myth that the busier you are the more successful you are. But it is definitely a myth. Being busy is a direct path to burnout, depression and apathy. Solution: Get your priorities right. Nine out of 10 entrepreneurs started their business to get their freedom back and had planned what to do with it. How would you like to spend your free time? Get your calendar, and book that “me” time or “with family” time before you plan that busy week ahead of you. It does not have to be any particular length of time. It can be finishing the workday early – say 15:00 – and spend time as you wish but no work. Alternatively, take a Friday off and unwind.
When the time comes, enjoy it, be in the moment, hide the phone in your bag or drawer and enjoy your well- deserved break. It might not be easy to do because you will be changing your habits, but you need to learn to enjoy life again. You will notice that after such breaks, you will have more eagerness to come back to your project or business. You will feel rejuvenated and ready to get to the finish line.
2. LACK OF CASH
Business owners go over and above to pay suppliers, freelancers and their team but leave themselves until last. This level of uncertainty causes pressure and stress, making them feel they have to chase the opportunities that can give them a little bit more income just to make the end of the month less stressful on their finances.
There is a whole mindset that many business owners have regarding things like this that they have to wait until they have built reserves in their bank before they can start to think about paying themselves, let alone investing. They believe that “it will come one day” and they continue to power through with minimal income. Let me tell you, the day will not come unless you make it happen.
Solution: To solve this problem we need to flip it on its head. It might sound illogical but it works. The first step in making this revolutionary shift is to identify how much the business owner personally needs to function comfortably. Do the personal budget: rent or mortgage, food, transport, entertainment. There is no need to make cuts or sacrifices at this point, but do not go crazy either. If you are usually travelling by public transport no need to budget uber now. Let’s get the real-time picture right now.
“Business owners go over and above to pay suppliers, freelancers and their team but leave themselves until last”
The second step is to get your business finances up to date in real-time. Look at your monthly profit and loss and see what’s the profit. Does it agree with the required personal income you calculated in step number one? If yes, then fantastic. You are on the right path. Now you need to train yourself to pay yourself first by your business.
If not, congratulations that you come this far. Do you have any eye-opening discoveries at this stage? While you are thinking about it, let me give you a few ideas on what to do in cases where your required personal income is not met by your business. First of all, you need to review your business model: profit margin of your business, terms of payments you offer to your customers – this is to increase cash coming into your business.
The next thing to review is the expenses you have in your business – how fast do you pay your suppliers, do you use the time they allow you not to pay their invoice? Do you recognise all expenses in your profit and loss? Are there any old subscriptions, or other expenses you no longer need?
The regular review of those saves business owners a very considerable amount of profit. When you have the income in your business account, you then pay yourself first, with the remaining amount in your business account for the suppliers, the staff, and knowing the remaining amounts that can be reinvested into training, business growth, and investment.
3. NO VISION
Business owners get tired, inspiration fades away and the results no longer make them happy. By constantly chasing the horizon, many business owners realise that the horizon always stays at the same distance, and this leads to resentment, fatigue and emptiness. With such a mood there is no desire to carry on the business.
This is the problem I hear frequently from new enquiries. Now, when we have a new client this is the very first exercise we do – we spend around half a day or day together and talk about their vision: what they would like to achieve by running their business. Once you get back to thinking about that you might have a lot of epiphanies and your excitement will start returning to you. It is a good checkpoint to understand if your business really will take you towards your vision, or if you are drifting away from it.
Solution: Think about those questions: How does your business look when it is built? What do you really aim for? I’m not talking about the mission of eradicating human hunger by serving freshly grounded coffee in your coffee shop, or creating an extra volume of oxygen by doing landscape design for your company. I’m talking about your goal: how many coffee shops? How big is your team? What customers do you want to serve? How often will you personally go on holidays?
Draw out your goals and your pictures, you may not be putting it on your website or discussing it with your team, but you should do it for yourself to ensure that your business and your own life are moving in the same direction.
I hope these solutions help you on your journey as a small business owner, and will ultimately help you to get to the 10-year anniversary of your business with joy and happiness, expecting the next 10 years to be enjoyable, too. There are many ups and downs in business, but having some of these steps in place, it can be an enjoyable rollercoaster for you to ride on.
Elena Meskhi is a business coach and best-selling author of new book, Rewire Your Business For Success: the 6-step method to increase profit and reclaim your freedom.