When I talk with people who want to start their own business, one of the first questions I ask is what will set their business apart from the competition. Too often the answer I get is that they plan to differentiate themselves through great service. A nice sentiment, but news flash — very few companies stay in business by providing mediocre service.
Good to great customer service is the cost of entry for a new business, so it’s difficult for a company to differentiate itself through service. But more damaging is a company’s inability to define its unique advantage, and this is a big reason why many start-ups and small businesses fail.
Here are some other common mistakes companies make which can be the difference between success and failure:
Lack of Planning. Too many people jump into a business idea before doing their homework to determine the business’ sales and profit potential. How many of your products or how much of your service do you need to sell in order to be successful? How will you price your product or service? What is your cost structure, and how does it compare to others in the industry? Assembling a business plan makes you think through each area of the business and create a road map for what needs to be done. The plan can be informal for your personal use or a formal plan for potential investors. Regardless, the business plan process requires you to think through these issues before you’ve gone too far down the road.
Insufficient Cash, or Poor Financial Structure. Even successful businesses can find themselves short on cash without proper financial planning. Understanding the timing of when expenses will occur and when you will get paid determines how much liquidity a business needs in order to support its operations. New companies have the added financial burden of start-up expenses to get off the ground. Businesses must have sufficient financial support — be it from their own pockets or from financial partners — if they are to survive and thrive.
Ineffective Marketing and Promotion. If a tree falls in the forest and no one hears it, does it make a sound? If you have a great business idea but you can’t reach your target customers, you won’t be around for long. Businesses fail if they can’t reach their customers and create an ongoing dialogue. Fortunately, now more than ever there are cost-effective ways to connect with potential customers using social media, e-blasts, and a good website which can compliment traditional marketing techniques.
And although it’s not critical if you have a home-based business, LOCATION remains a big reason for why some businesses fail or succeed. Particularly if you’re a retailer or a restaurant, your business won’t make it if your customers can’t find you, so don’t jump at a cheap lease for the wrong location.
Inability to Adapt to Changing Conditions. The tactics that a company uses to be successful this year will often not be the same next year. Conditions change, competitors adjust, and assumptions become outdated. Companies must take note of their changing surroundings and modify their business model if they want to stand the test of time.
Do you have a business question or topic that would make a good column? Send your ideas or questions to me at jeff.neuville@b-assistnc.com and share your business experience with others.
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