According to Stats Canada, only 51% of businesses survive beyond their first five years. And all too often, the ones that don’t make it end up shutting their doors for very similar reasons.
So how do you keep your small business from becoming the one out of every two that doesn’t succeed? The trick is to know what common challenges your business will likely face as it grows, and be prepared to face those challenges head-on.
1. Finding Time to Write a Business Plan
Business owners spend most of their time working in their business and not on their business. Although it’s important to ensure your customers are happy, it’s equally important for you to develop a business plan.
A business plan outlines the business goals and how the business will attain them. Without a plan you cannot get funding, can easily get off track and spend money on the things that are not going to move your business forward. Spend the time planning for success.
2. Developing an Elevator Pitch
In order to stay competitive, you need to develop your elevator pitch and be prepared to use it.
An elevator pitch is a short summary of your business and its value proposition. A value proposition is the business promise, what benefits a customer can expect by engaging with your business. Develop your elevator pitch and practice saying it – when someone asks what do you you’ll know you’re delivering a consistent message.
3. Attracting and Retaining Customers
Small businesses may find it more challenging to attract and retain customers because they generally don’t have large enough marketing budgets to compete with the advertising dollars that larger companies can spend.
You need to be strategic and creative in how you attract new customers. Online marketing, search engine optimization, email marketing and social media are great ways for you to attract and retain customers if you have a smaller budget.
It’s important while using these tactics that you spend the time differentiating your business from the competition so your message speaks to your consumer markets. If you don’t know who the members of your target market are and where they live, start by polling your existing customers and consider doing additional market research.
4. Understanding Your Financials
A study recently conducted by Intuit Canada reports that 83% of Canadian small businesses face a serious financial literacy skills gap. However, starting your business on sound financial footing is essential to its long-term success.
You need to review and understand your financials on a monthly basis so you know what is coming in and what is going out. Add up all your expenses each month so you know your minimum gross sales needed to cover your expenses. Review your sales over the past year and figure out where your sales are coming from so that you can use that information to project sales moving forward.
If you struggle with understanding finances, hire a bookkeeper or accountant to work with you on monthly reporting.
5. Keeping an Eye on Cashflow
If you have cashflow challenges, your business is in poor health. If your cashflow issues persist, your business may not be able to recover.
As a business owner, you need to dedicate time to managing your cashflow. Know what your cash balance is at all times, and project cashflow six months out. Having projections will prevent you from overspending and keep your finances in check.