In the startup world, stories of multibillion-dollar tech companies being launched from a garage or closet are legendary. But the Small Business Association (SBA) has some more sobering statistics. It reports that about 1 in 12 employer-owned businesses close each year, with only about 1 in 3 businesses still operating after 10 years.
With these challenges, it’s important to take lessons from other businesses’ mistakes without having to learn the hard way. Read on for five mistakes that can seriously cost your small or startup business.
Failure to identify market needs
Today’s technology-centered world provides a double-edged marketing sword for startups. It’s easier than ever to promote your own product or service from anywhere in the world—but on the other hand, you have to provide top-notch customer service to retain local customers who can just as easily purchase a similar product online.
As a result, knowing how to serve your customers’ needs—after first learning who your customers are—is the key to maintaining market presence and growth. Studies show that customers are often willing to pay nearly 20 percent more for a certain product or service just in exchange for good customer service. But the other side of that coin means that a single bad experience can send a lifelong customer packing. Knowing what constitutes good customer service for the majority of customers gives you the information you need to steer marketing decisions.
Fortunately, today’s available data metrics are incredibly sophisticated and can provide businesses with a complex profile of just about every customer. Offering loyalty programs and discounts that link a customer’s purchases to their online profile can give you an even deeper look, allowing you to push sales to the customers who are most likely to take advantage of them.
Fear of “Firing” Bad Customers and Clients
Part of identifying your market needs includes a tougher task—essentially weeding out the customers who don’t provide a good return on investment (ROI) or who just make your life difficult. Certain “high-maintenance” customers may require far more customer service time from your employees, and the price for their services should be calculated accordingly.
Other problem customers who may need to be culled from the herd include those who frequently make returns or exchanges, who have made multiple online or in-person complaints about service (regardless of your employees’ efforts to address their concerns) or those who have verbally harassed your employees. Whether you simply raise these customers’ rates to accommodate for the issues they cause or bar them from your business entirely, you’ll improve workplace morale and ensure you can fairly compensate your employees for the extra issues they must address.
Refusal to delegate
Although just about every startup business requires a bit of initial solo effort to get off the ground, in order for your business to ultimately be successful, you have to do more than “buy yourself a job.” When you’re too busy getting through the day-to-day to focus on future planning, you can’t give your business the marketing it deserves. Everyone has just 24 hours in a day, and studying the habits of entrepreneurial giants reveals that these CEOs, CFOs, and company founders rarely venture below the big-picture-decision level.
As a result, being able to delegate day-to-day tasks and decisions to trusted employees and managers leaves you free to do what you do best—pursue expansion opportunities, plan your business’s future, and learn more about your customers and clients.
Taking a “Set it and Forget it” Attitude Toward Marketing
Taking a look at the many once iconic mega-retailers that have folded in the last decade shows that, for most, the death knell came from failing to adapt to the internet age. By the time these retailers realized that their sparse, hard-to-navigate, or malfunctioning website was costing them millions in lost sales, it was often too late to regain the market share that had already been ceded.
The lesson to be learned from this is that marketing success requires constant adaptation. It’s not enough to create some basic customer profiles and assume you’ll be able to keep up as they evolve; instead, you need to periodically review your customer data (as well as larger industry and marketing trends) to ensure you’re focusing your marketing dollars on the most up-to-date profiles.
Testing multiple new marketing channels at once and tracking clicks and conversions can give you some quick insight into which efforts are getting the most views (and the most sales).
Even the best marketing and management decisions may become irrelevant if your business lacks sufficient working capital. Absent an angel investor or another source of relatively no-strings-attached funds, maintaining a tight hold on working capital can be the difference between weathering a bad season and shuttering your business.
Even if you’ve already delegated many of the financial decisions to a CFO or analyst, it’s incredibly important to regularly review your company’s finances and understand what’s being spent, where. If a product or marketing avenue isn’t yielding results within a few months, it should be given a fairly short leash; after all, no business has the time and capital to pursue unsuccessful projects indefinitely.
Maintaining an eye on the horizon (including hoarding cash and capital when a traditionally slow season is approaching) can keep you from being blindsided during a temporary market downturn. And if you anticipate needing additional working capital in the near future, seeking out your loan or cutback options before you’re in dire need of cash can give you the time you need to make the most prudent decision.
Avoiding mistakes in your small business
Although most business owners make countless other mistakes—large and small—every day, avoiding the biggest blunders a business owner can make should help your startup remain profitable for decades. Klein Hall CPAs can help. We’re a full-service CPA firm that offers everything from business consulting to accounting and tax preparation services to a broad range of clients in the Chicagoland area. Contact us today for more information about what we can do for you.