Why do most SMEs struggle or fail?
In the last 2 years we’ve seen a high rise in new businesses being established. The pandemic was an eye-opening moment for many people as they had to either find a new job or start their own business. However, the last two years have also been the years that go down to the history books as years of businesses closing their doors.
But, why do most businesses fail in their first 3 years? And why do many SMEs stop growing suddenly? These are some eternal questions that are being asked all the time. Did you know that Apple went almost bankrupt before re-hiring Steve Jobs in 1997. First thing he asked was “What business do we need to be in?”
According to CBInsights, 42% fail because there’s no demand for the product or service in the market. 29% of businesses ran out of
cash, 23% weren’t able to assemble a proper team. What was surprising about the results was that 14% of businesses ignored completely customers’ needs and also didn’t understand what marketing is. In 19% of the failures, they were outperformed by
competition. 13% failed because of internal conflicts and loss of focus.
How can you develop your thriving business?
As depressing as the statistics may look, you can still develop your thriving business and be one of the trailblazers in your industry. There’s a simple, yet very powerful formula to achieve your targets and claim your place with the big players.
Write a proper business plan and keep it up to date. Many SMEs think that once they’ve written their business plan, they don’t need to have a review of it anymore. As time goes by, market requirements change, business climate changes, there are new tools that can be leveraged. The only constant is change. You have to adapt, adopt, develop and communicate.
Ensure your finances are up to date. Your business needs to keep track on finances all the time. Cashflow, expenditure to mention few. Have a financial audit regularly to see where you’re able to make changes to be more cost-effective. If you need financing, look into grants, venture capital, angel investment, crowdfunding and private equity for example.
Invest in your team. Your business performs only at the level your team performs. Support, on boarding, training and collaboration along with effective communication are vital for your team’s performance.
Validate your product or service. A common stepping stone for SMEs and start-ups is not validating the product or service. You need to listen to your target market to know if there’s demand. Before launching you can also reach out to your network and ask their opinion. Why? Because when you get your ideal clients involved, they are also more likely to buy from you as they feel they are listened to.
Know what’s going on. You need to keep your eyes and ears open if you don’t want to fall behind and be out-performed by your competition. Always educate yourself and your team on what is going on in your industry.
One for all and all for one. Communication, support, collaboration and exchange of knowledge and experience is vital for any business. According to a study conducted in the United States of America, companies leave up to 60+M USD on the table due to poor communication. When there are conflicts and other issues withing the company, the performance suffers and so does the customer experience as your staff takes care of your business and they are the brand ambassadors of your business.
Focus. Rome wasn’t built in a day. Many businesses think that they can achieve their goals in no time but the fact is that it takes time to position yourself and get results. You need to understand who you’re serving. If you try serving many different audiences you end up wasting time and money as you shout to the woods. Give your full attention to what you originally set up to provide instead of trying to be everywhere and help everyone.
In the end it all boils down to communication, being disciplined, developing yourself and your team and collaborating. What would you add?