According to the U.S. Bureau of Labor Statistics, fewer than 50 percent of businesses reach the five-year survival mark. Depending on how you define failure, that figure can grow to as high as 80 percent if you consider failure as failing to meet the projected return on investment, according to Harvard Business School’s Working Knowledge blog.
In either case, no entrepreneur ever wants to be a part of any failure statistic. If your small business is teetering between success and failure, it might help to learn just why your business is failing and what you can do about it.
1. You don’t have a clear vision.
Lack of a clear vision is a turnoff for potential investors. Even if you’re not seeking investment funding, you need to know where your business is going and how you plan to get there in order to succeed. Outline your company goals, both short- and long-term, and have a clear description of the market needs your business meets and how you’ll provide products or services that fill existing gaps in the market. If you don’t know where you’re going, it’s impossible to know when you’ve taken a wrong turn.
2. You’re trying to be everything to everyone.
It can't be stressed enough: You have to find your niche. Many small businesses struggle simply because they’re trying to be everything to everyone. More than likely, “everyone” isn't your target market. So define your niche, and choose a tight market segment to serve. Expansion into new areas, markets, products and services can come later—once you know you're successfully servicing your target audience.
3. Your company isn’t growing.
Lack of growth can often be attributed to scalability issues. If you’ve reached a plateau but don’t have the resources to move past it by hiring additional staff or investing in more assets to accommodate the growing demand, you may feel as if you're between a rock and a hard place. Don't give up hope: It may not be easy, but if you approach all potential funding sources with a positive attitude and your ducks (financial paperwork) in a row, you could land the financing you need to move forward.
4. You don’t have the right business model.
Some businesses fail not because they’ve entered the wrong market, but because they have the wrong business model. Delivery is just as important as the products and services you provide. If you’re not giving customers what they need in a convenient, usable format, they’ll get what they need from your competitors who do. Entrepreneurs who conduct market research prior to starting their businesses have armed themselves with the knowledge of how their target consumers like to receive goods or services and have set their companies up for success. But restructuring your business model is still an achievable goal, though it will take some work.
5. You’re not adapting to changing market demands.
Even in-demand products that retailers can’t keep on their shelves today could be long forgotten tomorrow. Entrepreneurs must be agile to adapt readily to the demands of fickle consumers. Don’t get stuck on one method of doing things, one product, one service or one delivery model. A willingness to change and adapt is essential for long-term success.
6. You’re entrenched in an overly saturated market.
This isn’t a deal-breaker in itself. In fact, many entrepreneurs view a crowded marketplace as a critical indicator of demand. The key to overcoming this obstacle is to differentiate your company from the competition. Whether your company has a distinct philosophy or a unique approach, or transforms some aspect of the traditional offers of your competitors into something bigger, better or more useful, you can easily excel in a crowded market through differentiation.
Remember, many of the world’s most successful business owners started and failed numerous ventures before finally making it big. The experience of failure can provide valuable lessons and insights on what works and what doesn’t, and foster critical leadership development skills.
Embrace the challenge and the lesson. If you think you're leading a sinking ship, but your team is still on board, there's market demand for your product and you have the will to survive, you might just be able to turn things around and come out on top.
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